Discoms – the weakest link in the power chain

An article in the Business Standard provides a birds eye view of the power sector as it stands now. It reiterates the obvious – the problem is at the discom end, and is not easy to solve.

Whats interesting is that it provides a good assessment of the overall power scenario – something that is not so easy to see in the context of recent pessimism about the economy as a whole and the power sector in general. The conclusions are very interesting, and not very intuitive:

  • Most of the problems of fuel availability and cost pass through are history. The 12th plan target of adding 88,000 MW capacity seems easily achievable as about 60,000 MW is already under implementation.

” Political and administrative decisions on import-aggregation, pooled pricing and tariff pass-through, have, for all practical purposes, been taken.”

  • The recent grid-collapse aside, the transmission portion of the value chain has been well managed and required investment plans are in place
  • At the Discom level, the author identifies some factors that will affect the power sector as a whole:
  1. States are likely to move slowly to resolves issues like open access, free power to farmers, tariff increases. However, the plan for bailing out of discom’s may spur some reform: “This package for distribution companies comes with a host of conditionalities. There have to be regular tariff increases, and states will have to commit to undertake key power sector reforms, including change in the management control of loss-making distribution circles. There will be a quarterly review of distribution companies before the release of fresh funds.”
  2. State regulators will have to play a leading role in the reform of discoms
  3. Operatoinalising “open access” as envisaged by the central government will strain the discoms further in the short-term

 

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