Power Minister Iterates Plan To Overhaul Regulation, Enforcement Soon

India’s power ministry is pushing for an overhaul of electricity regulation and enforcement of contracts in order to stem losses of the state-run distribution companies that have burdened the sector. On solar imports, plans afoot to draw up a list of approved manufacturers for allowing imports.

The weak financial condition of distribution companies hurts their ability to pay producers, which in turn affects investments and credit in one of the world’s leading energy consumers.

Speaking at a webinar arranged by The Economic Times, Power Minister R.K. Singh said that the sector has traditionally suffered because state governments put pressure on regulators to not raise electricity tariffs to reflect prudent costs and they are unable to override this because they are state appointees.

“Discoms get short charged because they are in a weaker position. And then there are inefficiencies between billing and collections” he said.

“The problem is that if you (states) appoint a regulator he does what he wants you to do. I am adding to clauses of powers of regulators to remove them. If there has been a violation of law or gross dereliction of law then he can be removed,” he said.

Singh said that regulators will be mandated to look at power tariffs every year and will be subject to scrutiny. Separately, the government will also set up a body for enforcement of contracts. Distribution companies often delay payments to producers.

Already only about four to five regulators are not looking at examining power tariffs regularly. The southern state of Tamil Nadu has not raised tariffs since 2017, Singh observed. India has 30 states and all of them have their own distribution company.

Many of the distribution companies have piled up losses because of their inability to raise tariff as well as inefficient billing and collection, but he said that all the companies should be in the black in two to three years with the systemic changes being introduced.

Currently, distribution companies are able to sustain despite losses because they are refinanced by the state-run Power Finance Corporation and REC Ltd, but he said that such financial bailouts won’t be allowed in the future. “I am making an amendment to the act. You can’t draw power without making payment for it.”

The minister said that a final draft of the Electricity Act has been received together with comments and should be shortly going to the law ministry for vetting before being introduced in the parliament.

He added that smart metering and advance payments for electricity is being encouraged throughout the country to improve efficiency as bill readings and collections were happening infrequently due to lack of adequate manpower.

One solution to the weak regulation of the power sector is to privatise distribution companies, but they are now being given three months to make payments to producers, Singh said, adding that in case of defaults then they will look at the option.

The minister said that recent reforms that will introduce more private players in the coal sector should reduce prices of the fuel and thereby bring down electricity tariffs as well. India recently removed the monopoly of state-run Coal India Limited over coal production and allowed private players to bid for all assets. India has one of the world’s largest coal reserves.

Singh also said that the government was planning to introduce within a fortnight a system of approved list of manufacturers to supply to India’s renewable energy sector as well as basic customs duty to prevent any dumping of goods into the country. China is the largest supplier of solar equipment to India.