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Power Minister calls state-owned discoms ‘inefficient structures’

Calling state-owned power distribution companies (discoms) as “inefficient structures” for the first time, Power minister R K Singh asked them to become wholesalers of power and hire private companies as retail power suppliers.

Speaking at the inauguration of the two-day State Power Ministers’ Conference being hosted near the Statue of Unity, Singh said consumers deserve choice in power supply and at affordable rates.

“Right to good service and right of choice are enshrined in the constitution. You can’t overcharge industrial consumers. How can states get investments when you are charging Rs 8-9/unit to the industry?” he said.

Suggesting a new model of power supply, Singh said the states could become owner and wholesaler of power supply in the state and have private franchisee which sell to the consumers.

“Discoms can run and own the systems but have 3-4 suppliers who will buy in bulk after paying upfront to the discom,” he said. Similar proposition of ‘content and carriage separation” has been introduced in the amendments to the Electricity Act, 2005, which is yet to be tabled in the Parliament.

Asking the states to consider this proposition, Singh said, “We can’t increase jobs in the power industry unless we open up the distribution sector and allow more companies to compete with each other”

Business Standard reported on Thursday, Centre’s flagship reform scheme UDAY has been unable to improve the financials and operations of the discoms, rather has negatively impacted the financials of the state government as well.

While the minister did not mention UDAY even once in his speech, he urged the states to improve the ease of doing business in the power sector. “Ease of business is necessary to attract investment to cater to rising demands, and sanctity of contracts is warranted for that”, Singh said.

Andhra Pradesh followed by Uttar Pradesh recently are reviewing power tariffs, especially of renewable power projects. The minister warned the state that if they don’t adhere to payment discipline, bankers would stop giving loans to the power sector.

Referring to Andhra, he said, “One state breached terms of power purchase agreement and five different ambassadors got in touch with me,” he said.

The two day conference being hosted near Statue of Unity, the tallest statue in the world, would see congregation of energy ministers and department of all states and union territories. As the country achieves electrification of all households, the union ministry of power is prepping for another set of reforms to improve availability and quality of power. The Centre is planning to pursue the states to expedite supply reforms, renewable capacity addition and improving energy efficiency standards.

Source: Business Standard