The Hindu Business Line : End the inequity

PROMPTED BY A Parliamentary Standing Committee report, the Centre is considering a proposal to reduce the burden of the paying power consumer whenever the utilities raise tariffs. The Parliamentary Committee has reportedly asked the Centre to ensure that the entire burden of a retail tariff hike is not passed on to honest customers, for which it wants the rules amended. The Parliamentary Committee may indirectly be asking the States, through the Centre, to reduce cross-subsidies to the extent possible and not force a large number of consumers to pay high tariffs. It is also a signal to the utilities, including in States where distribution has been privatised, to widen the customer base by bringing into the paying category those who have been outside it and reduce the default rate.

Across the country, almost 40 per cent of the electricity that is consumed is not paid for; both agricultural consumers and those living in huts generally get power free, and a substantial portion of power generated is either stolen or lost and, hence, unaccounted for at the time of billing. Most States do not recover the cost of generation and distribution from even residential consumers — a large vote bank — and instead impose higher tariffs on industrial and commercial consumers. For long, industry has argued for cheaper power — first to make it globally competitive and also to reflect the ground realities of cheaper distribution to industrial consumers.

How the Centre is going to solve this knotty problem remains to be seen. More States are providing free power to agricultural pumpsets, while the cost of generation has been going up steadily on account of rising fuel costs. A 40 per cent gap is too large to bridge at one go. It is entirely up to the Electricity Regulatory Commissions in the States to look into this issue and there is little the Centre can do, apart from holding consultations with the States and getting them to take necessary steps. The onus will also be on the distribution utilities to meter all consumers and drastically cut down pilferage. It is no longer possible for utilities to pass on the burden of tariff hike to industrial consumers as the latter have the option of going in for captive generation.

But the fact remains that any decision on tariffs is still a political one. Of course, the governments that decide to provide free power to some categories of consumers or subsidise some others will have to compensate the utilities. The Regulatory Commissions may pass orders specifying the tariffs, but the party in power could decide otherwise, as happened in Tamil Nadu. The Regulatory Commission asked the Electricity Board to bill agricultural consumers, for which the State Government decided to give farmers the money to enable them pay their power bills. However, after the reverses of the 2004 parliamentary elections, the State Government decided to restore free power to farmers. That, then, is the reality of power sector tariffs. Yet, the realisation that it is no longer possible for utilities to continue milking the paying consumers to remain financially viable is a welcome sign. The Centre's move on this front will be eagerly watched.

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