The Parliamentary Standing Committee on Energy has recommended the Centre to hold comprehensive deliberations with States to rationalise the “complex” power tariff structure.

Emphasising that it would be “very difficult” to have a uniform tariff regime across India in “one go”, it has suggested dividing consumers into five major categories—domestic, agriculture, commercial, industrial and institutional.

However, analysts and State government officials said that such an exercise is not “feasible” as a uniform tariff regime would curtail the role of State Regulatory Commissions (SERCs). Besides, it does not address the issue of uniform voltage across distribution infrastructure that the tariff will create.

Another important recommendation by the panel is separation of agriculture feeders, which it points out will help in reducing Discoms AT&C losses.

Tariff rationalisation

The panel observed that many States while providing lower power tariff to poor consumers via cross subsidisation have created a large number of consumer tariff categories. In some cases, the number is as high as 93.

“The Committee, therefore, is of the opinion that the said proposal for rationalisation of tariff structure become part of the Tariff Policy and the States be persuaded to implement this earnestly. The Committee also desires that the Centre provide assistance to the States which may find it difficult to implement this due to some practical reasons,” it added.

Welcoming the suggestion on uniform tariffs, Nangia Anderson Leader (Power Sector Advisory) Arindam Ghosh, however, observed that the same would not be possible to implement in India, as every State has its own structure, policy and political inclination.

Power purchase cost is not uniform, so it would be difficult to achieve a uniform retail tariff across India. Depending on their location each State has different generation costs, he pointed out. “The committee mentioned cross subsidy, however, CERC guidelines say that cross subsidy cannot be more than 20 per cent and gradually they intend to make these cross subsidies zero. A uniform tariff regime would not work without cross subsidy, which is conflicting with CERC guidelines. In a uniform tariff regime, the sector that would be impacted most is the industrial sector. These industrial customers or the high-value customers would be impacted by the collection efficiency and cash flow of different Discoms which will ultimately result in increasing the revenue gap of different State Discoms,” he explained.

Ghosh pointed out that the committee has highlighted the renegotiations of long-term PPAs. If PPAs are cancelled or the terms renegotiated, some plants may have to be shut down.

Agriculture feeders

The Committee said that separation of feeders will facilitate Discoms to supply electricity to agriculture sector without interrupting quality and reliable power to domestic consumers.

“The Committee, therefore, is of the view that this system would benefit consumers as well as Discoms, as agriculture sector may get power at a supportive rate and State governments/ Discoms may rationalise their power procurement cost by resorting to Demand Side Management (DSM),” it added.

The panel recommend the Centre to proactively engage with States to assess the quantum of work that needs to be undertaken under feeder separation by doing cost-benefit analysis, encouraging them to execute it expeditiously and complete the process within a fixed timeline.

At present, there are about 1,64,057 rural feeders in the country. Of this, around 62,193 (37.91 per cent) are under agriculture category. Around 4,697 feeders have been separated as of December 2021. A balance of 166 feeders, as of December 2021, are under reconciliation.

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