The general public may once again get a shock of inflation. Under the automatic pass-through model, when the fuel rate increases in the international market, the discom will have to pay a higher price to buy electricity.
New Delhi: Rising inflation has broken the back of the general public. From petrol-diesel to food and drink items are also being continuously made. Meanwhile, the public may once again get a major setback. Along with the power generating companies in the country, the power distribution companies (discoms) are facing huge losses.
The power sector in the country is in bad shape. India imports coal on a large scale and coal is the main source of energy in the country. In such a situation, it is inevitable that when the price of fuel in the international market increases, then the cost of power generating companies will also increase. After the incident of Coal Crisis, the Power Ministry has issued instructions regarding the automatic pass-through model.
The general public will be shocked!
Under the automatic pass-through model, if the fuel rate increases after the futures contract, then there will be an additional burden on the government discoms. The discom will have to pay a higher price to the power plants than the contract. However, this move will improve the financial condition of the power generating companies, as they will get money at the increased cost. But, with this decision of the government, the financial condition of the power distribution companies ie discoms can also worsen.
It can be difficult to increase the rate
The work of discom is distribution of electricity and to collect money from the public in return. In such a situation, when the fuel rate increases, the discoms will have to pay a higher rate to the power producers to buy power, but due to political pressure and public opposition, it will be difficult to increase the price of electricity (power tariff). Despite this, the discom will take the decision to increase the power tariff under compulsion and its effect will be on the pockets of the general public. Of course, the electricity of the public will have to pay a higher price than before.
Power Ministry took this decision
After the incident of Coal Crisis, dozens of power plants in the country stopped working. Because they did not have coal to produce electricity. Private companies had to pay coal companies in advance. Due to lack of liquidity, they do not have the option of storage. In such a situation, the government had to take this decision.
This model is already implemented in some states.
Section 62(4) of the Electricity Act states that if there is a change in the rate of fuel, then the power tariff can be updated several times in a year. At present also there are some states where this (fuel surcharge adjustment) model works.
It is worth noting that the automatic pass-through model will not be fully automatic. When there is any change in the contract rate, the approval of the State Commission will have to be taken before that. The Ministry of Power has issued instructions regarding the new model on 9 November, while this information on its website has been updated on 11 November.
