According to reports, industry chamber CII on Sunday asked the government to bring in reforms in the power sector in order to help distribution companies overcome losses.
Losses of state electricity boards (SEBs) at over Rs 1,00,000 crore as of 2009-10 account for a large proportion of the fiscal deficit and subsidies in state budgets, Confederation of Indian Industry (CII) said in a report.
“The key issues that SEBs are battling with are cost-tariff mismatches. While there have been no substantial tariff revisions in the past five or six years, the power procurement cost had risen sharply,” the report added.
CII said this is impacting the country’s overall economy and will act as a deterrent to private as well as global investments in the sector.
“The financial loss has been estimated at 1.5 per cent of the national GDP. This will act as a major deterrent to the private as well as global investments in the sector,” CII Director General Chandrajit Banerjee said.
“With the bulk of the additional capacity being financed on the basis of long-term PPAs, the deteriorating financial position of state controlled utilities is a key concern,” Sunil Wadhwa, Chairman, CII Core Group on Distribution Reforms and Smart Grids said.
In addition, with mounting losses, the ability of the SEBs to buy power is curtailed, which leads to load shedding and inability to supply 24×7 power to all customers. CII said urgent reforms are needed to secure 24×7 Power for all.
CII has made numerous suggestions for reforming the distribution sector — increase competition in power distribution through adoption of franchisee route, increase private competition or public private partnership models.