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The overall subsidy dependence of state-owned power distribution utilities (discoms) for the current financial year (2017-18) is estimated at Rs 81,000 crore, an increase of around 7-8 percent over the previous fiscal, research and ratings agency ICRA said today.
“The increase in the subsidy requirement is predominantly driven by the subsidy and concessional tariff announcements in states during the pre-election period and continuation of subsidised nature of power tariff by state governments for certain consumer categories, even in case of upward revision in tariff by State Electricity Regulatory Commission (SERCs),” said SabyasachiMajumdar, Group Head & Senior Vice President, ICRA.
The overall subsidy requirement is further estimated to constitute around 17-18 per cent of the revenue requirement approved or estimated for the utilities for 2017-18, the agency said in a report. According to the assessment, Punjab and Madhya Pradesh are likely to witness a sharp increase in the subsidy support, of 29 percent and 49 percent respectively, in financial year 2017-2018, against the previous fiscal.
Majumdar also said the increase in subsidy burden depends on the estimated higher level of consumption by the subsidised consumer categories. The dependence on subsidy support for discoms in states such as Andhra Pradesh, Bihar, Gujarat, Karnataka, Haryana, Rajasthan, Tamil Nadu and Telangana continues to be significant, ranging between 11-29 percent of the overall revenue requirement across the states, the report states.
ICRA also said that in case schemes such as Direct Benefit Transfer (DBT), which is being proposed in Bihar, were to be implemented, the direct subsidy dependence on the state government would reduce for the discoms. Timeliness and adequacy of subsidy support from the respective state governments assumes critical significance from the discoms’ liquidity perspective.
According to policy research firm Brookings India, the Indian power sector has been facing sharp increases in subsidies and cross-subsidies since the 1970s.
“Part of this stems from the debate over whether electricity is a commodity or a public good; the former is amenable to markets, while the latter has been viewed as a basic, if not fundamental, right,” the report released in April said.
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