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Move to buy power from cheaper sources

AAP govt’s promise to halve electricity tariff warrants difficult job of revising PPAs; more discoms may be let in.

Written by Shalini Narayan | New Delhi |
February 23, 2015 1:38:22 am
AAP, Power, aam aadmi party The government will also aim to fulfil its promise of conducting a CAG audit into distribution companies or discoms.

The AAP government is planning to seek de-allocation from high-cost power stations so that it can buy electricity from cheaper sources to help fulfil its poll promise of cutting electricity tariffs by nearly half. Reducing the average per unit cost of purchasing power would allow the government to stick to its declared goal of capping all subsidies at Rs 2,000 crore.

The government will also aim to fulfil its promise of conducting a CAG audit into distribution companies or discoms, and creating open access for consumers by bringing in competition among discoms.

Sources told Newsline that the government is working on a strategy to alter power purchase agreements (PPAs) that have been signed by between discoms and producers. “The current tariff for power per unit between 1 and 200 units is Rs 4 and between 201 and 400 units, Rs 5.95. We are bound by the PPAs based on which the ministry of power gives power to distributors,” a source said.

“There are a few distributors who are giving us power at very high rates. The government wants to be in a position to purchase from distributors which offer cheaper rates. Also, different distributors offer different rates. While some offer a unit at Rs 4 or below, other charge Rs 6 and above. Unless we target the purchase cost from distributors, we cannot control our subsidy,” the source said.

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Sources said that when power is purchased from a distributor at a particular rate, by the time it reaches the consumer, the cost is nearly doubled, with the inclusion of line losses, transmission costs, distribution costs, distribution losses, loss in sale of surplus power, interest payments on the loan taken, regulatory assets and return on capital and the like.

They said, to begin with, an audit of discoms will give a rough idea of where the loopholes are and how they are being exploited. “We have to ascertain whether the distributors have actually invested the capital expenditure they show on paper, analyse the issues of zero billing, line losses” said the source.

The government has also proposed bringing in competition among distributors so that the consumer gets to choose from whom it can purchase power at a lower cost. This, the party claims, will improve services of distributors and bring in fair competition.


The AAP has promised a near 50 per cent subsidy to all those consuming power up to 400 units daily. For the same, the government is working around a plan to bring down the cost per unit of power between 0 and 200 units to either Rs 2 or Rs 2.4 from Rs 4 at the present rate and between 201 and 400 units, to either Rs 3 or Rs 3.6 from the present Rs 5.95.

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First published on: 23-02-2015 at 01:38:22 am
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