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MAY 31 2018

Bad news for discoms: Narendra Modi government proposes to penalise them for load-shedding

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 31st MAY 2018


The draft amendment to the National Tariff Policy, 2016, released by the power ministry on Wednesday proposed to introduce a penalty mechanism for gratuitous load-shedding by electricity distribution companies (discoms), capping cross subsidies at 20% of the power supply cost and compute tariffs assuming aggregate technical and commercial (AT&C) losses of 15%.

The ministry would await stakeholders’ comments on the proposed amendments till June 20. The draft also said that regulators should not take into account the subsidy component disbursed by the states while calculating tariffs and if state governments decide to subsidise certain consumer categories, it has to be done solely through direct benefit transfer (DBT) mechanism.

“In case of power cuts other than in force majeure conditions or technical faults an appropriate penalty, as determined by the state electricity regulatory commission shall be levied on the distribution company and credited to the account of the respective consumers.

The draft also proposes to reduce the cost of electricity units and increase the fixed monthly rental, in line with the two part tariff (fixed and variable) mechanism through which discoms pay power generators. “In order to reflect the actual share of fixed cost in the revenue requirement of distribution licences, there is need to enhance recovery through fixed charges,” it said. While the fixed charges, roughly 40-45% of the tariff, are used to recover the costs of establishing and operating power plants, the variable charges are used to compensate for fuel charges and other taxes.


DIRECT Regulators Distribution Companies Tariff Electricity Regulatory Commission Power Tariff policy Electricity Consumer National Tariff Policy

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