Finance Commission meets the Ministry of Power

Finance Commission meets the Ministry of Power 

The Fifteenth Finance Commission had a meeting with the Ministry of Power in New Delhi today. The meeting was chaired by the Minister for Power, Shri R. K. Singh along with the Chairman of the Finance Commission Shri N.K. Singh. Members of the Commission and Senior Officers of the Commission , Ministry of Power and its Public Sector Undertakings were also present.

The meeting discussed the impact of the power sector reforms on state finances as there was a significant correlation between the two

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. The liabilities on account of guarantees provided to power units are quite significant in a number of States. 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 GDP in 2011-12. The stakeholders discussed the issue in detail.

In the case of the power sector, the earlier Commissions (13th and 14thFC) had deliberations in the meeting and gathered these issues that some States had not raised tariffs for eight or nine years despite increasing deficits, and that the absence of timely tariff increases had adversely affected the operations of the utilities. Further, it noted that in several States, where tariff revisions had taken place, financial gaps had been reduced. Nevertheless, large financial deficits continued to persist since the true costs were not taken account of.

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 Union Ministry of Power 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 as well as lead to improvements in the revenue and liquidity position of distribution utilities. It pointed out that the Financial Restructuring Plan of state-owned distribution companies contained a condition for mandatory tariff revisions.

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% highways in five year i.e. 2020-25 at a cost of Rs.5000 crores.

The Ministry has also proposed VGF of upto 40% amounting to Rs.83500 crores to meet the cost of installation of Flue Gas Desulphurization to meet the new norms notified by MoEF & CC for power plants.

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