The states have been asked by the Planning Commission to increase the charges of electricity. The Planning Commission has also been asked to use the power subsidy to improve the essential services like drinking water, health and education.

The Commission argued that only rationalization of tariff can ensure sustainable growth of the ailing power sector which is essential for promoting inclusive growth. Montek Singh Ahluwalia while addressing the states’ power ministers conference in New Delhi said, “The way the current situation (can) be handled is through some combination of tariff increase and serious efforts to reduce AT&C losses”.

The chairman has also cautioned that the states which fail to raise the power charges regularly would be required to make deep adjustments. Ahluwalia added, “Many states which have not adjusted tariff for 10 years in a row and assume that even a simple inflation adjustment of 5 per cent … they (may) need to adjust it by 60 per cent”.

The Ahluwalia also said that in an economically sustainable model , the subsidy should be there for only certain category of people. The chairman said that the states should not waste money for subsiding power but should use the funds to provide basic facilities like drinking water, health and education.