Finance Commission discusses impact of power reforms on states

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SME Times News Bureau | 16 Feb, 2019
The Fifteenth Finance Commission on Friday discussed the impact of the power sector reforms on state finances in a meeting with the Ministry of Power.

"The fiscal positions of states have been impacted by exposure to guarantees provided to power utilities and other public sector units, including those in the transport sector," an official statement said.

Power Minister R.K. Singh chaired the meeting along with Finance Commission Chairman N.K. Singh. It was attended by members of the Commission and senior officers of Power Ministry and its Public Sector Undertakings (PSUs).

"The liabilities on account of guarantees provided to power units are quite significant in a number of states," it said. The stakeholders discussed the issue in detail as there was a significant correlation between the guarantees and state finances.

By assigning a weight of 90 per cent to the power sector guarantees and 10 per cent to other guarantees, including transport sector guarantees, the extended debt of all states, in aggregate was around 23.3 per cent of the GDP in 2011-12.

The earlier two Commissions had pointed out that some states had not raised tariffs for 8-9 years despite increasing deficits and that the absence of timely tariff increases had adversely affected the operations of the utilities.

The regulatory institutions, in general, lacked sufficient capabilities and urged the expediting of tariff reforms, including a multi-year tariff implementation, as required by the Electricity Act, 2003. The Ministry discussed the remedial steps in this regard.

The Ministry concurred with the views of the states that compliance with the directions of Appellate Tribunal for Electricity (APTEL) by State Electricity Regulatory Commissions (SERCs) would bring about discipline and simplify procedures in the distribution sector.

It will also lead to improvements in the revenue and liquidity position of distribution utilities. The meeting discussed in detail updated status of the UDAY Scheme.

The Ministry has proposed to the Commission a scheme for supporting transiting to electric mobility in India - for rolling out EV infrastructure across 70 cities and 20 per cent highways during 2020-25 at a cost of Rs 5,000 crore.

The Commission and the Ministry agreed to have a separate meeting soon with Ministry of New and Renewable Energy.