Supreme Court Mandates States to Clear Power Dues in 4 Years, Paving Way for Tariff Hikes Nationwide – EQ
In Short : The Supreme Court has ordered all states and Union Territories to clear power distribution companies’ (DisComs) regulatory dues within four years, starting April 2024. New dues must be settled within three years. This ruling mandates cost-reflective tariffs, likely causing a rise in electricity bills across India, while ensuring financial stability and accountability in the power sector.
In Detail : The Supreme Court has delivered a landmark ruling directing all states and Union Territories to clear the pending regulatory assets of power distribution companies (DisComs) within four years, starting April 1, 2024. These regulatory assets represent accumulated revenue gaps arising from selling electricity below cost, which regulators allowed to be deferred over time.
In addition to existing dues, the Court has mandated that any new regulatory assets created after this date must be liquidated within three years. This move aims to prevent the unchecked build-up of future liabilities that have historically strained the power distribution system.
The Court stressed that electricity tariffs must reflect the actual cost of supply. It directed that future revenue gaps should be treated as exceptional cases and capped at 3% of the Annual Revenue Requirement (ARR) for DisComs, discouraging systematic under-recovery.
Regulatory commissions across India are now required to issue a time-bound plan for the recovery of these dues, including applicable carrying costs or interest. This roadmap must be detailed and enforceable to ensure timely liquidation of all outstanding liabilities.
Delhi’s discoms alone face regulatory dues exceeding ₹27,000 crore. These include BSES Rajdhani Power, BSES Yamuna Power, and Tata Power Delhi Distribution. The new timeline puts pressure on state regulators to clear these liabilities efficiently.
The judgment also empowers the Appellate Tribunal for Electricity (APTEL) to oversee and monitor compliance with the directives issued by the Court. This ensures a higher degree of regulatory accountability in the implementation process.
Consumers across the country are likely to face higher electricity bills in the coming years as utilities recover past under-recoveries through tariff hikes. Both residential and commercial categories are expected to be impacted.
While the move may increase short-term costs for consumers, it aims to bring long-term financial stability to the power distribution sector. Ensuring timely cost recovery helps avoid disruptions in service and supports investment in grid infrastructure.
The ruling has been widely seen as a wake-up call for power sector regulators, who have often delayed tariff revisions for political or administrative reasons. The decision now forces a shift towards transparent and sustainable power pricing across India.
