States Increase Power Tariffs Yet Again

A few state electricity boards have once again raised the power tariffs. In the last fiscal, all major states had hiked the tariffs and increasing the tariffs again is definitely positive news for the sector. This move has come at the right time when the CERC too has given some breather to a few private sector power companies.

According to news reports, Andhra Pradesh, Haryana, Gujarat, Odisha, Punjab, Meghalaya, Nagaland, Bihar and Daman and Diu have raised power tariffs. Other states like Tamil Nadu, Maharashtra, Kerala and Goa are also expected to increase the tariffs soon.

The news inflow in the power sector has remained very positive in this month. Earlier in the month, CERC, in its landmark hearing, allowed Adani Power and Tata Power to recover their fuel costs by means of compensatory tariff from the state distribution utilities. This was a necessity for these power companies which were looking for a tariff hike for more than two years owing to the losses faced in their projects.

Though the higher tariffs will hit consumers, it will help state utilities to improve their financials. In September 2012, the government had approved a debt restructuring scheme to the state electricity boards. This scheme is yet to be finalised, but assures healthy balance-sheets of the SEBs. This will lead to utilities buying more electricity from power companies fueling electricity demand.

Experts in the power sector are of the view that the power sector has gone through a massive change and the same will be reflected on the financials of the companies in the next two years. One, however, has to consider the quantum of hike, which will ultimately decide whether the financials of the companies will really improve.