Green tariffs may hurt discoms

07 Oct 2024 CW Team

India’s transition towards renewable energy is causing financial concerns for distribution companies (discoms) due to the low tariffs set for green electricity. The government’s aim of promoting clean energy has led to competitive pricing, especially for commercial and industrial consumers.

However, these green tariffs are often lower than the rates of conventional power, leading to a revenue shortfall for discoms. With steady operational costs and long-term power purchase agreements tied to higher conventional power prices, many discoms are now struggling to maintain financial sustainability.

The disparity between low-cost green energy and traditional power costs is widening, potentially forcing discoms into financial difficulties if the issue is not addressed. Furthermore, discoms argue that they are obligated to distribute power at regulated tariffs while absorbing the losses caused by the difference in cost recovery.

These financial pressures are exacerbated by rising debts in many discoms, making it harder for them to invest in infrastructure or ensure reliable services. The sector is calling for regulatory reforms or compensation mechanisms to help discoms bridge this financial gap, ensuring that they can continue to support India's renewable energy goals while remaining economically viable.

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