Power discoms to follow uniform accounting rules

New Delhi: The Centre has instructed all power distribution companies (discoms) to adopt uniform accounting practices, with an aim to prevent financial misreporting. The fresh directive, issued earlier this month, seeks disclosures over and above those specified under the Indian Accounting Standard. These include details of revenue from sale of energy, number of consumers, average cost of supply, number of prepaid meters in government offices and cross-subsidy.

The move is aimed at curbing the ability of the discoms to create regulatory assets and account for them as future revenue, said people familiar with the matter.

"It will help in better assessing credit ratings of discoms from financial statements," said an official, who did not wish to be identified.


According to the power ministry directive, any sum not provided in the tariff orders will not be recognised as revenue or income recoverable from future tariff in the financial statements.

Discom are now seeking clarity regarding the status of existing regulatory assets and how to account for them, said people in the know.

State discoms handle last-mile connectivity, acting as intermediaries between power producers and end consumers. Due to the sensitive nature of business, tariff revisions by discom are governed by state electricity regulatory commissions (SERCs).

Traditionally, discom have sought future recoverable after various court orders allowed higher costs that can be passed on to consumers. "SERCs tend to delay adoption of court orders, leading to creation of regulatory assets that can be recovered from subsequent tariff orders," said an official from a discom, adding that accounting of any new regulatory asset will now require approval from state regulator.

"The power ministry's directive is expected to improve the working of regulators as well," the official said.

Discoms are expecting about ₹1.53 lakh crore as regulatory assets that they hope to recover from prospective tariff hikes. Discoms in Tamil Nadu, Rajasthan and Delhi have highest regulatory assetssince regulators have disallowed earlier tariff hikes to safeguard end consumers.