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Care For DISCOMs

New Delhi: The Union Government puts in place additional measures to improve financial health of Discoms with streamlining the process of accounting, reporting, billing and payment of subsidy by States to the Distribution Companies. The measures come in the wake of the need for a framework for sustainability of the sector and the fact that improper and non-transparent accounting as well as non-payment or delayed payment of subsidy announced by the States is one of the reasons for financial distress of Discoms. The Ministry of Power notified rules on 26 July.

The Rules mandate that a quarterly report shall be submitted by the distribution licensee within thirty days from end date of the respective quarter and the State Commission shall examine the report, and issue it within thirty days of submission of the quarterly report. The report will inter-alia cover the findings regarding raising of demands for subsidy based on accounts of the energy consumed by the subsidised categories; and the subsidy payable to these categories as announced by State Government and the actual payment of subsidy in accordance with section 65 of the Act.

Provision has been made that if subsidy accounting and the raising of bills for subsidy is not found in accordance with the Act or Rules or Regulations issued there under, the State Commission shall take appropriate action against those responsible for non-compliance as per provisions of the Act.

Under the framework for sustainability, in order to define a definite and reasonable goal for reduction of Aggregate Technical and Commercial (AT&C) loss, it is prescribed that the AT&C loss reduction trajectory would be approved by the State Commissions for tariff determination in accordance with the trajectory agreed by the respective State Governments and approved by the Central Government under any national scheme or programme, or otherwise.  The trajectory for both collection and billing efficiency, for distribution licensee have to be determined by the State Commission, accordingly.

In order to ensure the recovery of full costs incurred by the Distribution licensee in distributing electricity, it has been prescribed that all prudent costs of power procurement, done in a transparent manner, would be taken into account, while approving the tariff. Similarly, all the prudent costs incurred by the distribution licensee for creating the assets for development and maintenance of distribution system would be accounted for subject to fulfillment of prescribed conditions.

It is also provided that Gains or losses accrued to distribution licensee due to deviation from approved AT&C loss reduction trajectory would be shared between the distribution licensee and consumers.

For establishing norms for operation and maintenance of the distribution system, Central Electricity Authority has been mandated to issue guidelines.

Reasonable Return on Equity (RoE) is one of the major factors required to ensure investment in the sector. The Rule provides that the RoE by the State Commission would be aligned with the RoE specified by the CERC in its Tariff Regulations for the relevant period, with appropriate modification taking into account the risks involved in distribution business.