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Cost reflective tariffs, independence of regulators to address Discoms solvency issues: Additional Secretary, Ministry of Power
Jul 21, 2020
NEW DELHI, 21 July 2020: Mr Sanjay Malhotra, Additional Secretary, Ministry of Power, Govt of India, today said that in order to support the viability of the sector, there is a need to address the issue of solvency of Discoms through measures such as cost reflective tariffs and ensuring independence of regulators.
Addressing FICCI webinar 'Effective Dispute Resolution in the Indian Power Sector', Mr Malhotra said, "There is a need to ensure capacity building of institutions including State Discoms and Regulatory Commissions. This will help in ensuring operational and commercial efficiency of State Discoms."
Emphasizing on the enactment of Electricity Contracts Enforcement Agency (ECEA) in the draft amendments to Electricity Act 2003, Mr Malhotra said that currently the tariff related disputes have been kept out of the purview of proposed ECEA. "Government is willing to look into all the suggestions in this regard," he said.
He also mentioned that number of benches and judges would not be a constraint for disposal of cases in the proposal of enactment of a separate dispute resolution authority.
The Draft Electricity Act (Amendment) Bill 2020 has proposed a relook at the dispute resolution in the Indian power sector and creation of Electricity Contracts Enforcement Agency for enforcement of contracts while leaving disputes involving tariff out of its purview.
Mr Vipul Tuli, Chairman, FICCI Power Committee and Managing Director, Sembcorp Energy India Ltd said that there is issue of liquidity in the sector and urgent measures are required to restore the health of the sector. He further added that the average return on equity for the private companies has eroded over the years and was negative last year. Highlighting the importance on the need of effective dispute resolution mechanism in the country, he said that there is a need for separation of rulemaking/tariff setting from all adjudication. However, a central body will give more credibility in the eyes of the investors.
The participants also highlighted that the proposed dispute resolution mechanism will help lessen the burden of the regulatory commissions and will lead to speedy resolution of disputes. The need to provide more teeth to the regulators was also emphasized during the session.
The webinar also deliberated on the need of bringing private sector efficiencies & accountability in distribution segment through direct benefit transfer of subsidies, provisions of distribution sub licensee, measures for reduction of power procurement costs, promoting privatization in the sector as taken up for the Union Territories which will help in ensuring long term sustainability of the sector.
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