Centre asks states to allow automatic pass through of costs to discoms

The Central government has asked states to allow their electricity distribution companies to pass on increase in costs to power tariffs, which can later be vetted by regulatory commissions.

Presently, there is no automatic pass through as tariff revisions need approval of the state commissions, which seldom leads to delays.

“It may be changed to provide for automatic pass through in tariff change in costs on account of change-in law or power purchase costs. This will result in less working capital requirements by the discoms, leading to less costs of power for the consumers,” the Union power ministry has written to the states.

Power sector has been witnessing issues relating to availability of fuel, mainly coal and gas for the power plants. Recently there was a sudden spike in the price of coal and gas in the international markets, it said

For the lack of robust mechanism of timely automatic pass through of fuel cost and transportation costs the generating companies face constraints in maintaining stock of fuel during such periods. This results in shortage of supply in the grid which may affect the power supply to the consumer, it said.

“Distribution companies face revenue constraints as he corresponding pass through of cost is not done regularly and timely in the retail tariff.