The Hindu Business Line : TN cuts power tariffs for domestic consumers

IN yet another reversal of reforms, a fallout of its defeat in the Lok Sabha elections, the AIADMK Government on Monday cut electricity tariff for domestic consumers to be effective from June 16. The Government would directly bear the subsidy and compensate the Tamil Nadu Electricity Board for this.

The Government's move, announced through a press release by the Chief Minister, Ms J. Jayalalithaa, means that electricity tariffs for domestic consumers will go down by 31.8 per cent to 42.3 per cent across different slabs, the cut ranging from 35 paise to Rs 1.70 a unit.

Against a tariff of Rs 1.10 a unit for those consuming up to 50 units for two months, the tariff will now be 75 paise; for those consuming between 51 and 100 units, the tariff will be 85 paise a unit against Rs 1.30 earlier; for those consuming 101-200 units, the tariff will be Rs 1.50 against Rs 2.60; from 201 to 600 units, the tariff will be Rs 2.20 a unit against Rs 3.50; and 601 units and above, the tariff will be Rs 3.05 against Rs 4.75.

As per the Government's move, domestic consumers will be charged at January 2000 tariff, thus nullifying two tariff revisions made since then, one by this Government in December 2001 and the other mandated by the Tamil Nadu Electricity Regulatory Commission in March 2003 following a tariff revision petition filed by the electricity board.

Within a week of the Lok Sabha election results being announced, the Jayalalithaa Government announced that it was restoring free power to all farmers and that it would pay the subsidy directly to the electricity board. Besides, it had also withdrawn the steps it had taken to prune the food subsidy bill.

In the press release, Ms Jayalalithaa said the Government would provide the requisite subsidy to the TNEB. "I have ordered that the subsidy amount, namely, Rs 910 crore per annum to benefit 116.57 lakh domestic consumers be paid by the State Government to the Tamil Nadu Electricity Board."

She said, "The willingness of the State Government to pay the subsidy will be indicated to the Tamil Nadu Electricity Regulatory Commission with the request to reduce the tariffs as mentioned."

She said the Government would take necessary steps before the regulatory commission to ensure that the actual tariffs charged for the electricity supplied to domestic consumers are reduced to the level on December 1, 2001, before the revision on that date. "My Government will also indicate to the regulatory commission that the Government will provide the subsidy amount to the Tamil Nadu Electricity Board on behalf of the domestic consumers for the reduced tariffs."

The release said that the electricity bill for a family consuming 500 units for two months would get reduced from Rs 1,440 to Rs 900. Likewise, the bill for a family consuming 900 units for two months will get reduced to Rs 2,035 from Rs 3,215.

Ms Jayalalithaa said she had received representations from the public that the electricity tariff for domestic consumers be reduced. She said her Government had taken steps to improve TNEB's finances and had brought down its deficit from Rs 5,000 crore to Rs 1,603 crore in 2004-05.

The cost of supply now is Rs 3.38 a unit and the actual realisation about Rs 2.50.

According to TNEB data, the average rate of realisation for domestic consumers was Rs 1.57 a unit in 2000-01, Rs 1.58 in 2001-02 and Rs 1.79 in 2002-03. The cost of energy at the low tension-end in these years was Rs 2.81, Rs 3.24 and Rs 3.39, respectively.

In January 2000, the then DMK Government raised tariffs for all categories of consumers. For domestic consumers, there was no increase in tariff for the slabs up to 50 units in two months and 51-100 units. The tariff for others was: 101-200 units, Rs 1.50 a unit (Rs 1.30 earlier); 201-600 units, Rs 2.20 (Rs 1.95); 601 units and above, Rs 3.05 (Rs 2.75).

In December 2001, the Government raised domestic tariffs as follows: up to 50 units for two months, 85 paise; 51 to 100 units, Re 1; 101 to 200 units, Rs 2; 201 to 600 units, Rs 3; 601 to 1,000 units, Rs 4; and 1,001 units and above, Rs 4.50.

In March 2003, the Tamil Nadu Electricity Regulatory Commission revised these tariffs to: up to 50 units, Rs 1.10 a unit; 51-100 units, Rs 1.30; 101-200 units, Rs 2.60; 201-600 units, Rs 3.50; 601 and above, Rs 4.75.

In a statement, the Tamil Nadu Chamber of Commerce & Industry has welcomed the reduction in domestic power tariff and wanted similar concessions to be extended to industrial and commercial consumers also.

TNEB's plans go haywire

THE reduction in power tariff for domestic consumers has more or less put paid to the Tamil Nadu Electricity Board's plans to file a fresh tariff revision petition, its second, before the Tamil Nadu Electricity Regulatory Commission.

As in September 2002, the TNEB had hired Crisil, a credit rating and advisory agency, to help it in preparing the tariff revision petition.

Although the TNEB, as an independent agency, could still go ahead and file a petition, it is unlikely to do so.

The regulatory commission approved a tariff hike in March 2003 after a series of public hearings. This was the first order by the regulatory commission.

Sources also point out that unlike in the case of farmers, there was no demand from domestic consumers for a reduction in power tariff. Moreover, even if the Government wanted to extend concessions to the largest segment of consumers, it could have brought it down to March 2003 levels — to the rates prevalent before the tariff increase allowed by the Tamil Nadu Electricity Regulatory Commission was enforced — rather than to pre-December 1, 2001, levels.

The sources wonder how the TNEB would manage the situation, especially since the Government's move more or less shuts out tariff increase as an option.

The TNEB would be forced to approach the Government for tariff compensation, as it did till three years ago, or borrow more from the market.

Also, with the Government's revenue deficit for 2004-05 estimated at Rs 3,336.43 crore, it remains to be seen whether the Government will be in a position to bail out the TNEB, annually.