Power cost variation of discoms to be passed on to consumers

The central government is planning to amend Electricity Rules 2005 to allow power distribution companies pass on additional costs arising from power procurement variation and transmission costs to end consumers of electricity.

"The impact in the cost due to such variation shall be automatically passed through in the consumer tariff, on a monthly basis", said the draft notification circulated to the states and other stakeholders by the Union Ministry of Power.

It said an appropriate commission shall within 90 days of publication of these rules specify a price adjustment formula for recovery of the costs, arising on account of the variation in the price of the fuel or power purchase costs. The draft has also published a formula for arriving at the cost per unit for passing on the additional costs. Such monthly automatic adjustments shall be trued up on an annual basis by the appropriate commission.

Industry sources say the move, which will burden consumers, is part of the attempts to improve the poor financial health of distribution companies. Recently, Indian Prime Minister Narendra Modi had urged state governments to clear bills due to power distribution companies to bring stability in India's energy sector. Various estimates say overall debt of power utilities are over ₹6 lakh crore and they owe power generating companies dues to the tune of ₹2-2.5 lakh crore. Normally discoms pay power generation companies bills with a gap of 2-3 months, say industry sources.

Recently employees of discoms and many political parties had opposed a planned amendment in the electricity rules to allow more private participation and competition among distribution companies. While employees fear private discom entry will harm their interests, farmers fear they may lose power subsidies.