ET reported that, amid rising concerns about the poor financial health of power distribution companies, electricity tariffs are likely to go up in many states, including West Bengal and Karnataka, in coming months.

A report said that power distribution companies (discoms) are estimated to have incurred a whopping loss of INR 70,000 crore last fiscal on account of the mismatch between tariffs and the cost of producing power.

According to financial services group Motilal Oswal, "We expect several states including Tamil Nadu, Maharashtra, Karnataka and West Bengal to raise tariffs by December, 2011, due to State Electricity Boards precarious financial position, improved political will and possibly increased consumer dissent over blackouts."

In a report this month, Motilal Oswal noted that in the past 18 months, 22 states increased power tariffs, which is a record. It added that "This includes the highest loss-making states like Tamil Nadu, Andhra Pradesh, Rajasthan, Madhya Pradesh, Maharashtra, Orissa, Punjab and Uttar Pradesh."

Meanwhile, there are also fears that loss-making discoms could default on their credit obligations, which could result in a significant amount of bad loans for the banking sector. The country has about 73 power distribution entities.

The central government is also working on various initiatives to improve the performance of discoms and a high level panel on the financial position of distribution utilities is expected to submit its report next month.

Furthermore, the government is working on a common rating system for discoms, which would help lenders extend loans only to entities that meet certain criteria.

(Sourced from ET)