Power Distribution Tariffs in India - 2023

Power distribution utilities rely on tariffs to generate revenue and cover expenses and network expansion costs. This business model seems reasonable at first glance. However, despite this, discoms are often plagued with losses. The question is, where does the system fail? Is it due to the discoms prioritizing consumer interests or the authorities' intentions to create a politically acceptable system?

It is challenging to achieve unbiased clarity in the space of power distribution, but it is evident that the context and intentions of authorities play a role in hindering the financial sustainability of discoms. This unfortunate reality continues to plague discoms, and tariff rationalization may offer a solution to this problem. However, to understand why this is necessary, we must first acknowledge that there is no mandate for state discoms in India to adjust the cost of supply annually. Furthermore, net metering payouts are based on the average cost of electricity supply or the cost of supply for only 8-9 states out of the total 29. So, why are discoms not adjusting their tariffs accordingly? The cost of generating electricity has increased, particularly for thermal power due to fuel cost appreciation and technology improvements to reduce emissions in the country.

In this regard there is a need for a dossier which attempts to make a few analytical observations that are relevant for the states, their regulators and other stake holders listing various components which goes into tariff computation of different consumers as per their respective distribution utilities.