The government has put in place additional measures to improve the financial health of Discoms with streamlining the process of accounting, reporting, billing and payment of subsidy by states to distribution companies.

The measures come in the wake of the need for a framework for sustainability of the sector and the fact that improper and non-transparent accounting as well as non-payment or delayed payment of subsidy announced by the states are one of the reasons for financial distress of Discoms. The Ministry of Power notified the rules on 26 July.

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The rules mandate that a quarterly report shall be submitted by the distribution licensee within 30 days from end date of the respective quarter and the state commission shall examine the report, and issue it within 30 days of submission of the quarterly report.

The report will inter-alia cover the findings regarding raising of demands for subsidy based on accounts of the energy consumed by the subsidised categories; and the subsidy payable to these categories as announced by a state government and the actual payment of subsidy in accordance with section 65 of the act.

Provision has been made that if subsidy accounting and the raising of bills for subsidy is not found in accordance with the act or rules and regulations issued thereunder, the state commission shall take appropriate action against those responsible for non-compliance as per provisions of the Act.

Under the framework for sustainability, in order to define a definite and reasonable goal for reduction of Aggregate Technical and Commercial (AT&C) loss, it is prescribed that the AT&C loss reduction trajectory would be approved by the state commissions for tariff determination in accordance with the trajectory agreed by the respective state governments and approved by the central government under any national scheme or programme, or otherwise.

The trajectory for both collection and billing efficiency, for distribution licensees, has to be determined by the state commission, accordingly.

In order to ensure the recovery of full costs incurred by the distribution licensee in distributing electricity, it has been prescribed that all prudent costs of power procurement, done in a transparent manner, would be taken into account, while approving the tariff.

Similarly, all the prudent costs incurred by the distribution licensee for creating the assets for development and maintenance of the distribution system would be accounted for subject to fulfillment of prescribed conditions.