The upcoming budget session, starting on February 1, is slated to bring landmark changes in the power sector, as the concept of cost-reflective tariffs has been included in the Electricity Amendment Bill, which aims to reduce losses for power distribution companies (Discoms). Cost-reflective tariffs become crucial in the backdrop of the long-standing debt and losses faced by power distribution companies in the country.
In his address to the first annual conference of the All-India Power Distribution Companies Association (AIDA), ‘EDICON 2026,’ the Union Minister for Power, Manohar Lal Khattar, stated that power distribution companies are a crucial link in the power supply value chain, which includes generation, transmission, and distribution.
Provision for introducing cost-reflective tariffs aimed at reducing losses incurred by power distribution companies. Khattar stressed that power distribution companies offer direct 'B2C' (business-to-consumer) services to consumers. Also, customer complaints regarding service quality, as well as other issues, reach them first.
The minister said, "We are introducing a provision for cost-reflective tariffs to reduce the losses of power distribution companies. This will include all costs associated with power supply in the tariff, which will reduce the losses of power distribution companies. This bill may be introduced in this budget session of Parliament. Efforts will be made to build consensus for its smooth passage."
How will cost-reflective tariffs help DISCOMs?
According to the Union Minister, the draft National Electricity Policy 2026 also includes a provision for cost-reflective tariffs. It is aimed at significantly reducing the losses and debt of power distribution companies.
The Power Ministry has also sought suggestions from stakeholders. The Minister emphasised saying that cost-reflective tariffs will ensure that power distribution companies earn profits, which can in turn be used for cross-subsidisation. However, cross-subsidies should be extended in adherence with the rules.
The upcoming Electricity Amendment Bill will address challenges, including losses and debt of power distribution companies (DISCOMs), non-cost-reflective tariffs, and excessive cross-subsidies.
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