Industrial units drawing power from outside their State may feel the heat

Under pressure from State utilities, electricity regulators are being forced to reverse the reform agenda in the power sector and turn protectionist.

Punjab, which has been among the most forward-looking States in allowing industrial consumers to buy electricity from outside the State through the short-term open access window, has now imposed a cross-subsidy charge.

Industrial consumers will have to shell out this extra amount every time they buy power from outside, presumably to stop the State-owned utility in Punjab from bleeding.

There are worries that other States such as Tamil Nadu, Andhra Pradesh and Gujarat, which have been liberal in allowing short-term open access to industrial consumers, too could turn back the clock on reforms.

PUNJAB SLAPS SURCHARGE

Under the open-access provision, a key reform measure ushered in by the Electricity Act 2003, consumers of electricity, starting with big industrial units, can buy power from a utility of their choice, either from inside the State or outside it.

The Punjab State Electricity Regulatory Commission (PSERC), in a decision earlier this month, imposed a cross-subsidy surcharge of 74.48 paise per unit on open-access consumers from the State, including Nahar Spinning, Vardhman Textiles, Punjab Alkalis and Chemicals, Hero Cycles and Modern Steels Ltd.

Before this, apart from the cost of power and the requisite transmission charge, these firms did not have to pay any extra charge while buying from outside.

The surcharge makes it costlier for industrial consumers to get power through open access and forces them to buy from the State Electricity Board, even though it may be selling expensive power.

Industrial tariffs in Punjab, at around Rs 5 per unit, are among the highest in the country, while power is available across the border in Himachal Pradesh and on the electricity bourses at Rs 3-3.5 a unit.

PSERC Chairman, Mr Virender Singh, said there was a need to take a balanced view keeping in mind the interests of both the utility and consumers. This is reflected in the order, which states that the move is being taken to “prevent financial loss” to State-owned power utility, Punjab State Power Corporation Ltd (PSPCL).

“With the high-end consumers migrating to open access without paying any surcharge, the burden on the distribution licensee (PSPCL) increases, which ultimately results in increase in tariff of the remaining about 70 lakh consumers... If this loss is passed on to the remaining consumers, it will result in an unjustified hike in the tariff for these consumers,” the order says.

In its decision, PSERC has also levied wheeling charges on open-access consumers. The new charges came barely two months after PSERC raised power tariff by 8 per cent for the industry for the year 2011-12. Punjab's industrial sector termed the move as “unwarranted” and “anti-industry”, and said it would lead to exit of existing industries to other States.

Besides, a renewed interest in industrialisation in Punjab, mainly riding on cheap power from Himachal Pradesh, could be hit badly.

Domino effect

“Power is costliest in Punjab... The move will force the industry to shut down businesses in the State,” an executive with Vardhman Textiles said.

A Central Electricity Authority official said there are only around 10 States that allow open access to consumers. Now with Punjab going back on this, there could be a domino effect that could washout whatever reform that has happened so far in this direction.

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