Indian Power Discoms' Tariff Gap Has Bounce Back: IEEFA Report

The reforms of power distribution companies in India through schemes like UDAY were primarily encouraging but the tariff gap and losses have recovered in the last two years and the firms are now dwindling to meet long outstanding payments to power generators which have risen to Rs 74,900 crore as on December 2019, according to a new report by Institute for Energy Economics and Financial Analysis (IEEFA).

It added the financial health of discoms, coupled with a lack of competition, is undermining the country's power distribution and generation sectors and hindering renewable energy investments.

The report, "India’s Power Distribution Sector Needs Further Reform" stated the distribution sector is the weakest link in the entire value chain of the power sector.

"State-owned discoms continue to suffer huge financial losses because they control the distribution of quality and reliable power to Indian households and businesses, a critical prerequisite to sustained economic growth in India," Vibhuti Garg, the author of the report, said.

She also recommended extremely financially distressed discoms should either privatize their operations or the states must allow the entry of suitably qualified and capitalized private distribution entities willing to invest in the sector.