The Centre has decided to convey its displeasure to the UP government over the latter’s recent move to supply free power to 2 crore small farmers even as it seeks a bailout package for its debt-ridden power distribution companies.
“We will ask the state energy secretary what advice he is giving to the government on this,” a Union power ministry official told FE.
The state discoms have outstanding short-term loans of about R40,000 crore, besides huge arrears for power taken through the unscheduled interchange route and from traders. The state increased electricity tariff by 20% this October for the first time after 2009-10. But despite that, discoms’ accumulated losses stand at R18,224 crore.
The scope for recovering losses for state-owned discoms remains limited with 24-29% of their total electricity supply being lost due to widespread theft. Industry experts say the free power supply plan could prove a financial black hole because power to the agriculture sector consumers in UP remains unmetered.
The state recently secured a R1,800-crore transitional loan from the Power Finance Corporation by giving an undertaking that it will initiate key reforms to improve the financial health of its discoms. So far, PFC has only partially disbursed the loan. “We have set reform milestones for the state against loan sanction,” a PFC official said.