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After prolonged resistance, Ms Mamata Banerjee-led West Bengal government has finally cleared decks for State-controlled power utilities to recover cost push till 2010-11 through tariff enhancements. The utilities were suffering from a severe fund crisis, leading to regular bout of supply shortage in districts.
While the late prudence is expected to help avert a collapse of the power scenario, especially during the ensuing Boro season (Jan-April) of rice cultivation, over a crore of electricity consumers are now faced with a steep rise in tariff from as low as 4.27 as in December 2011 to nearly Rs. 5.33 as in February. The tariff could have gone up to nearly Rs 5.57 a unit, had the State not provided 24 paise direct subsidy, per unit of electricity consumed, costing the state revenue account nearly Rs 37 crore a month or over Rs 440 crore a year.
Clearly, if Ms. Banerjee's government had not stock to her populist stand for so long, consumers could have been spared from a steep 25 per cent hike in electricity charges in nearly one-go. The worst part of the story is: Even after this hike, the State utilities would be left with huge unclaimed dues, in terms of arrears, worth nearly Rs 1,000-1,500 crore against cost push till 2010-11.
The rising graph
In addition to fear of a looming crisis, what apparently made Ms Banerjee to rethink on her policies was the order by the Appellate Tribunal for Electricity in November making it binding for the state level regulators to take steps to avert a wider financial crisis due to tariff inadequacy.
In December, the state electricity regulatory commission approved a petition submitted before Ms Banerjee came in power in May 2011; allowing the distribution company to charge Rs 4.95 a unit.
This includes recovery of 44 paise on old dues which could not be recovered due to legal hurdles plus part of the cost push in generation in 2010-11. With the State offering 24 paise a unit subsidy, consumers were billed Rs 4.71 with retrospective effect from April 1, 2011.
However, this is not the end of the worries for the State utilities. The West Bengal government is yet to allow them to file tariff petition for 2011-12 and, if they miss the last call they will be forced to absorb this cost-push.
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