Government Likely to Amend Electricity Act to Ensure that DISCOMs Enter PPAs

DISCOMs have fallen into the habit of not entering into PPAs, preferring to depend on the spot market, Power Minister R.K. Singh noted


The union government has proposed an amendment to the Electricity Act to ensure that the companies applying for power distribution rights also sign the requisite Power Purchase Agreements (PPAs).

The announcement was made by Power Minister R.K. Singh while speaking on government’s recent milestone of bringing electricity to all the villages across the country. Recently, the government announced that with the electrification of Leisang village in the Senapati district of Manipur, India has now achieved total electrification of its 597,464 inhabited villages.

Singh said the changes to the law will play a pivotal role in helping India achieve the next target of universal electrification by December 2018.

“The regulator giving rights to a distribution company over an area of 2 crore consumers, for instance, has to ensure that it has enough power to meet up to the peak demand,” news agency Press Trust of India (PTI) quoted Singh as saying.

Elaborating on the nature of change in the Act, Singh said, “We are going to propose amendments to the (Electricity) Act that if a DISCOM’s demand is 5,000 MW, then it should have entered into PPAs for that amount of power”.

Singh further added that since there was no longer a state monopoly, DISCOMs have fallen into the habit of not entering into PPAs but preferring to depend on the spot market.

“The root of the problems is the DISCOMs’ incapacity to buy power because they are running losses and this fundamental problem needs to be addressed,” Singh told PTI.

In March 2018, Singh had directed Rural Energy Corporation (REC) and Power Finance Corporation (PFC) to not grant loans to distribution companies (DISCOMs) which are making heavy losses (above 15 per cent) unless they chalk out a plan to reduce them.

The minister had also noted that many DISCOMs have been making heavy transmission and distribution (T&D) losses and it may be difficult for them to repay the loans.

Previously, Mercom had reported that the aggregate technical and commercial (AT&C) losses for the states and union territories under the Ujwal DISCOM Assurance Yojana (UDAY) program increased in the past one year.

According to the data provided by the government, as of December 2017, the AT&C losses in 24 of the UDAY states and union territories stood at 22.73 percent. Out of the participant states, the DISCOMs of nine UDAY states and union territories underwent a huge spike in AT&C losses. These states are: Chhattisgarh, Punjab, Jharkhand, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Puducherry, Maharashtra, and Tripura.

The government is currently working towards providing electricity connections to all the remaining households, both rural and urban, under the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) initiative. The state of Meghalaya has become the latest participant of SAUBHAGYA after AssamMadhya PradeshManipur, and Jammu and Kashmir.