New Delhi: BSES Yamuna Power Ltd and BSES Rajdhani Power Ltd, the two units of Reliance Infrastructure Ltd that supply electricity to about 3.5 million customers in the national capital, on Monday, approached the Delhi Electricity Regulatory Commission seeking an increase in power tariff for 2016-17 to recover accumulated losses incurred from the sale of power below cost of procurement.

The move follows a threat by state-run power producer NTPC Ltd to cut electricity supply to the two power distribution companies from 10 May for non-payment of dues worth ₹ 1,300 crore.

The two utilities have asked the regulator to give a schedule for recovering the past losses of about ₹ 16,000 crore, said a person familiar with the BSES move, who declined to be named.

The companies collectively purchase 2,027 megawatts (MW) a month from NTPC.

Reliance Infrastructure entities informed the regulator on 9 May that since they are not allowed to realize a tariff that reflects the actual cost of power procurement from the consumer, the revenue gap, also called regulatory assets, has been increasing every year.

The companies informed that once a clear road map is provided by the regulator, they will be able to raise loans and discharge payment obligations to the power producer.

NTPC had on 5 May stated that it served notices to BSES Yamuna and BSES Rajdhani for the regulation of power supply with effect from midnight of 10 May for 2,027MW, the total amount of power bought by the distributors.

On the same day, the two BSES units said that it was under financial stress due to the revenue gap and it is trying to clear the pending dues in a just and equitable manner.

NTPC argued it has to pay upfront for raw materials and its plants risked facing outages on account of fuel shortage.

The Central Electricity Regulatory Commission (Regulation of Power Supply) Regulations, 2010, allows power producers to restrict supply to distribution and transmission firms for defaulting on payment obligations. Electricity is a highly regulated sector with power tariff being determined by state-level regulatory commissions that do not let distributors to pass on past losses to the consumer.

A part of the revenue gap of power distributers are often attributed to inefficiency in billing all the units of power supplied, including power theft.

The centre introduced a new turnaround scheme for state-run power distribution companies on 5 November called the Ujwal Discom Assurance Yojana, which in addition to loan takeovers by state governments, also fixed performance improvement targets.

Power minister Piyush Goyal said on 5 January that power producers too will benefit from the scheme once distribution companies regain their financial health and buy more power.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay High court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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