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‘Discoms can turn profitable only if regulators stop trimming their margins’

Posted On : September 05, 2018

Any move to corporatise power distribution companies (Discoms) will have to be implemented only after reforming the electricity regulatory commissions.

Speaking to BusinessLine at the sidelines of the Conference of Power and Renewable Energy Ministers of States and Union Territories, state government officials said that the profits of Discoms can improve only if regulators stop trimming their margins.

Speaking at an event in June this year, Ajay Kumar Bhalla, Secretary, Ministry of Power, had said, “Discoms should operate like corporate entities, consider listing and even offer dividends.” Bhalla had also said that there should be no more cross-subsidy and the government was seeking to institutionalise this in the Amendments to the Electricity Act.

A state government official said, “Discoms can think of offering dividend and operate like profitable entities only of the regulators allow them to do so. Whenever there is the semblance of a gain, the regulators swiftly curtail margins.”

These comments come at a time when the sixth integrated rating for state power distribution utilities states that the cost coverage ratio of 25 out of 41 rated Discoms remained low due to a substantial increase in expenses and non-cost reflective tariffs. Essentially this means that the Discoms have mostly not over shot their planned expenditure? but their margins have not increased since the power tariffs were not revised adequately?.

The best performers on the cost coverage parameters are Gujarat Discoms and Kanpur Electricity Supply Company Ltd (KESCO). In toto, five Discoms have shown a 15 per cent improvement and these are West Bengal State Electricity Distribution Company Ltd, KESCO, Gulbarga Electric Supply Company Ltd, Ajmer Vidyut Vitran Nigam Ltd and Jaipur Vidyut Vitran Nigam Ltd.

The ratings are for the financial year 2016-2017. The top grade in operational parameters for Discoms is owned by four Discoms of Gujarat and Uttrakhand Power Corporation Ltd.

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