New Delhi: The Central government is working on a new reform-based debt restructuring scheme for electricity distribution utilities, while also pushing for recognition of discom debt as the liability of state governments, the Ministry of Power said on Tuesday. The announcement came after the 5th meeting of the Group of Ministers (GoM) on discom viability chaired by Power Minister Manohar Lal in New Delhi.
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According to the ministry, Regulatory Commissions must issue full-cost tariff orders in a timely manner. Where subsidies are required, state governments may provide them, but utilities should recover their full costs through tariffs.
The ministry also said that in order to discourage motivated litigation, regulatory mechanisms for mediation should be introduced to ensure faster resolution of disputes.
The ministry underlined that the mounting debt of distribution utilities should be treated as the ultimate liability of state governments, given the gravity of the debt situation and its implications for state finances and the wider economy.
The power minister emphasised the importance of improving the operational and financial health of discoms to ensure reliable supply to consumers, and urged states to accelerate installation of prepaid smart meters in government establishments.
ICRA recently estimated that the gross debt of state-owned discoms rose to Rs 7.4 trillion as of March 2024, up from Rs 6.6 trillion a year earlier, reflecting their continued reliance on borrowings. The rating agency has maintained a Negative outlook on the sector, citing weak operating efficiencies, high debt levels and inadequate tariff revisions.
The Ministry of Power made a presentation on the proposed Electricity (Amendment) Bill, which seeks to strengthen regulatory frameworks, improve the financial viability of utilities, facilitate ease of living and doing business, and support India’s energy transition.
Other reform measures highlighted by the ministry included timely payment of subsidies and dues by government departments, increased use of data analytics for demand forecasting and power purchase optimisation, and expediting smart metering works.
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The ministry said the GoM reaffirmed its commitment to deliver a reform package designed to make improvements in discom finances “irreversible” and to prevent the recurrence of a debt trap.