Power Ministry wants State regulators to periodically revise tariffs

The Power Ministry wants State regulators to regularly revise electricity tariff so that there are no financial outages for generation companies or distribution utilities. This will also protect consumers from sudden, steep hikes in their electricity bills.

The Ministry will propose this in its presentation planned for Prime Minister Narendra Modi. It is part of the next wave of reforms the Ministry wants to usher in through amendments to the Electricity Act, 2003. The Ministry’s emphasis is on State regulators because power is a Concurrent subject.

The Ministry also wants the State regulators to permit automatic fuel cost adjustments to avoid any lag impact on tariff. Coal-based power plants account for over 57 per cent of electricity generated in India and over the last three years, Coal India has raised prices by over 30 per cent. The variable cost component in a consumer’s electricity bill is nearly 70 per cent and variable costs account for items such as fuel.

According to a CRISIL report, power tariffs increased less than 5 per cent in the five years ended fiscal 2009-10 while in the same period annual per capita incomes rose 13.4 per cent. The report said in the four-year period ended 2009-10, only 10 States had revised tariffs. States such as Haryana had not revised tariffs for nearly a decade.

Some of the State Electricity Regulatory Commissions have shied away from increasing tariffs due to political reasons, a senior Power Ministry official said. The result: Financially bleeding distribution utilities that are unable to buy electricity which has also turned expensive, leaving homes in darkness and industries fuming.

The Central Electricity Regulatory Commission (CERC) undertakes a tariff revision annually while the tariff determination principles are revised every five years.

“We revise our tariffs every year,” said SK Chatterjee, Joint Chief (Regulatory Affairs) at CERC. However, CERC has powers to regulate the tariffs of central generating stations as well as for all inter-State generation, transmission and supply of power. Ashok Kumar Khurana, Director-General, Association of Power Producers, said the majority of the issues plaguing the sector would disappear if all stakeholders, including the Centre, States, and private/public sector utilities implement the Electricity Act in spirit and not in form.

“In fact, not even 40 per cent of the Act has been implemented,” he said, adding that in some States, cross subsidisation is to an extent that it is not sustainable in the long run, making the industry uncompetitive.

Agriculture and household consumers are sold electricity at much lower rates than the commercial users, Khurana added. “The Act says cross subsidisation should be progressive. The Act came into existence in 2003 and we are into 2014 now, but it has not happened and in fact it has increased in many States.” he said.

COMMENT NOW