Tariff Rationalisation in Rajasthan

Background
The policy and regulatory landscape of the Indian power sector are undergoing a rapid transformation. Along with an aggressive policy mandate for adopting clean energy, there is a definitive push for ushering structural and policy reforms from various stakeholders.

The rationalisation of electricity tariffs is a key reform agenda for this transformation. The political economy of the power sector has dictated the evolution of a complex tariff regime, creating structural inefficiencies and impacting the sustainability of distribution utilities. Academic and social research has established disproportionate allocation of subsidies, increasing subsidy burden on the state governments, inhibiting energy conservation, insufficient willingness to pay by poor consumers, and misalignment between power procurement costs and electricity sales revenue.

COVID 19 pandemic has pushed many distribution companies (Discoms) into a financial crisis, and these in Rajasthan are amongst the worst distribution utilities. Further, failure to meet targets under the UDAY Scheme and burden on the State Government to carry the losses of approximately 75,000 crores has limited its borrowing capacity and resources to finance economic recovery and development activities.

Economic recovery and safeguarding the pandemic hit poor households is an essential mandate for the State Government. Simultaneously, the implementation of Rights of Electricity Consumer (Rules) 2020 notified by Ministry of Power is likely to push distribution utilities to improve performance on the supply side – a precarious situation unless utilities improve their profitability. The current scenario has created a sense of urgency for reforms amongst regulatory authority, administration and the State Government. The overarching objective is to simplify, structure and rationalise tariffs for delivering an efficient and inclusive electricity supply in Rajasthan.

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