State Power Minsters resolve to cut cross subsidies

New Delhi, Dec 8 (IANS) State Power Minsters have resolved to prepare a plan to reduce cross-subsidies by March 2018 as per the guidelines in the tariff policy, which would reduce the power rates for commercial and industrial consumers, an official said on Friday.

The resolution to adopt an action plan to realise the changes made last year to the Electricity Act providing for a lower cross subsidy level of 20 per cent was one among other reforms agreed on at the states' Power Ministers meeting here with Union Power Minister R.K. Singh on Thursday.

Cross subsidy, which currently can be as high as 200 per cent in some cases, is the mechanism by which industrial and commercial consumers pay higher tariffs that subsidise the lower charges paid by domestic, agricultural and other users.

"States resolve to prepare roadmap for reduction of cross subsidies as per Tariff Policy by March 2018 and bring in tariff reforms by simplification of consumer tariff categories and rationalization of electricity tariff," the resolution adopted by the ministers said, according to a Power Ministry release here.

Briefing reporters during a break in the meeting, the Union Power Minister advocated standardising electricity tariffs across the country and said the states have agreed to reduce the number of slabs for selling power.

He had said cross subsidies in the tariff policy will be phased out to bring it down to 20 per cent in the first phase, adding that power must be made available to industry at a reasonable cost to ensure the success of the 'Make in India' programme.

Singh said that changes were being proposed to the Act to remove human interface in billing, metering and collections by introducing prepaid systems that would help poor consumers and smart metering, as well as cap the permissible limit for factoring in discom losses in the tariff policy, by mandating that discoms cannot pass on the billing losses to consumers.

Inaugurating the conference, Singh said that in many states, around 45-55 per cent of the power supplied by distribution companies (discoms) was not billed, and the Centre would soon be making prepaid usage and smart metering mandatory to counter losses on this account.

According to the statement, the states also resolved to clear all government dues of discoms for the current year along with 25 per cent of arrears so that all previous dues are paid off by March 2019.

Noting that around Rs 85,000 crore had been spent on the renewal of distribution infrastructure in the country, Singh also said that, despite the Centre's Uday debt restructing scheme, the state discoms' viability would return to very poor unless they remedied their billing losses.

The power sector accounts for a major chunk of the non-performing assets, or bad loans, in the Indian banking system that have crossed a staggering Rs 8 lakh crore.