High-end consumers foot the bill of Bengal rural electrification scheme

Pratim Ranjan Bose Kolkata. May 11 | Updated on May 11, 2011 Published on May 11, 2011

State utility forced to pass on low-end liabilities to urban clients

It may serve as a case study on the implication of rural electrification on power tariff – especially, on the middle and upper middle class domestic consumers as well as business and commerce who largely cross-subsidise the smaller domestic consumers.

Costly power

During the last five years, average tariff of the State-controlled power distribution utility in Bengal – catering to four out of every five of the 1.1 crore subscribers in the State – has increased by a staggering 50 per cent to Rs 4.64 a unit. The increase, needless to say, has outpaced the rise in coal prices.

However, this is just half of the story. For the last two years, West Bengal Electricity Distribution Company Ltd (WBSEDCL) is running short of cash. The utility has Rs 2,500-crore worth of petitions pertaining to cost push till 2009-10 still pending tariff award. A bulk of them has already been accepted by the regulator as valid.

To put it straight, if not artificially suppressed, electricity supplied by the State utility should have cost a few rupees more than the average electricity tariff (Rs 4.73 a unit) of CESC Ltd.

A private sector operator CESC is the second largest utility in the State catering to 25 lakh consumers in the twin cities of Kolkata and Howrah.

Five years ago, the average tariff of CESC Ltd was nearly 60 paise more than the tariff charged by the State utility. Today there is hardly any tariff differential between the two. Most importantly, unlike WBSEDCL, CESC is in the pink of health and does not have any tariff petition pending before the regulator.

In a regulatory regime, the utilities are obliged to follow the efficiency parameters set by the regulator, failing which they have to absorb the cost differential. Naturally, the inefficiencies of WBSEDCL, if any, should not reflect on the tariff they are allowed to charge.

Root cause

Sources in State power sector points at the rising cost of delivering power to the rural poor as a major reason behind the rise in average tariff of the state utility.

As per 2001 Census, one in every five rural households in Bengal has electricity connection. State officials now claim that the ratio has improved drastically since then, especially during the last 5-6 years. Unofficial estimates available with the State government suggest that as in 2011, nearly half of the rural household are electrified.

The extension of the State's power-map to rural areas can be verified from another angle. In 2005, WBSEDCL had a total of 42 lakh consumers, of which 57 per cent or 24 lakh were in the rural sector. Five years hence, the company provides power to 85 lakh subscribers, three-fourth of which is rural. In other words, of the 43 lakh consumers added by the state utility during the period, 39 lakh or 90 per cent are rural.

High rural cost

With increased rural penetration, there arises another problem. According to sources, the average cost of delivering electricity to a rural customer is close to Rs 6 a unit. In contrast, the average realisation from a rural consumer is Rs 3.50 a unit, substantially lower than the average tariff.

In stark comparison to the average monthly consumption of 850 units a household in the plush Salt Lake City (a satellite township in the Eastern fringe of Kolkata), nearly 60 per cent of the rural subscribers consume as low as 200-250 units a year (which is sufficient to light a 100 watt bulb for 10 hours a day for seven-eight months). The average billing of a rural household is as low as Rs 40-50 a month, against an average cost of Rs 20 per consumer for collection of the same.

“Rural electrification is definitely a welcome situation. However, it may send the electricity bills of high-end domestic consumers, industry as well business and commerce soaring, as they have to bear the cost of it,” an industry expert says.

The problem will be more acute in cases where the utility has low base of high-end consumers, as is the case with WBSEDCL which does not have access to the creamy layer in Kolkata. As against a consumer base of 85 lakh, the utility has merely two lakh high-end domestic and commercial users, coupled with 85,000 industrial subscribers.

Published on May 11, 2011
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