Discoms Return To Their Old Defaulting Ways

India’s power industry is a long term running mess especially on its distribution side with most of the distribution utilities holding billions of dollars of losses on their balance sheet and continue to sell power at below costs. The main reason for their mess is that they are controlled by the state governments who regard giving power at a cheap cost as a key political plank. Raising power prices is considered bad for the re-election prospects of a party, resulting in these companies being saddled by huge losses every year. Though the new central government under the BJP has brought about massive positive changes in the power sector, they have been unable to reform these black sheep of India’s energy industry.

The UDAY scheme was launched with much fanfare a couple of years back to reform and restructure almost 430,000 crores of losses that the industry faced at that point of time. With most of the debt being moved from the utility books to the state government books, the debt and interest load was substantially reduced. As part of this UDAY scheme, it was also planned that the prices of the utility power would be brought on par with the costs by 2019, amongst other things such as power for all, energy efficiency etc.

However, the distribution utilities have not changed and the first state Jharkhand that had gotten into this federal scheme is again back to its merry defaulting ways. The state which had earlier paid of all its major creditors has again run bills worth more than a thousand crores to major power suppliers. This BJP state would have been expected to stick to the path of reform but it apparently has not. The state has also been criticized for buying too much solar energy in the past, given that its consumption is not large enough without considering the costs of buying that power.

India has tried to reform the power sector twice in the past and each time this sector has emerged even more problematic than before. Like they say “the more things change the more they remain the same” and it has never been more true of India’s sick electricity distribution industry. India’s prime minister and the energy minister should come down heavily on the state party and government otherwise their flagship policy UDAY will remain “brightness” in name only as customers in the state go without power because their distribution utility has no money to pay the power suppliers.

A year later, however, Jharkhand has piled up ?1,300 crore in fresh dues to DVC and ?32 crore to Coal India. It has simply stopped paying dues to DVC for the purchase of roughly 700 MW a day. Repeated efforts to seek clarifications from Jharkhand Chief Secretary Raj Bala Verma and Additional Chief Secretary – Energy RK Srivastava were unsuccessful.

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