States raise electricity tariffs again

Eight states and one Union territory have gone for another round of increases, ranging between 3.6% and 24%
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First Published: Wed, Apr 17 2013. 12 11 AM IST
The increase in electricity tariffs will hit consumers, but should help reduce the losses of state-owned distribution companies (discoms)Photo: Ramesh Pathania/Mint
The increase in electricity tariffs will hit consumers, but should help reduce the losses of state-owned distribution companies (discoms)Photo: Ramesh Pathania/Mint
Updated: Wed, Apr 17 2013. 12 58 AM IST
New Delhi: Within a year of raising electricity tariffs, eight states, including Punjab, Gujarat and Bihar, and one Union territory (UT) have gone in for another round of increases.
With more states such as Uttar Pradesh expected to follow suit, this year could be a repeat of the last fiscal year, when 23 states and five UTs raised their tariffs. The increase ranges from 3.6% in Orissa to 24% in Andhra Pradesh. The numbers were collated for Mint by audit and consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd that analysed tariff orders, and assumed that domestic households would consume 300 units (kilowatt-hour) on an average every month on a minimum load of 4 kilowatts.
The increase will hit consumers, but should help reduce the losses of state-owned distribution companies (discoms).
The newly formed Aam Admi Party (AAP) has sought to parlay the inflated electricity bills in New Delhi to carve out a political space for itself.
The states and the UT that have raised tariffs for the current fiscal are Andhra Pradesh, Haryana, Gujarat, Orissa, Punjab, Meghalaya, Nagaland, Bihar, and Daman and Diu. These states had also raised tariffs in the last fiscal.
Mint reported on 5 April that Indian domestic consumers in 16 states were paying at least Rs.4 per unit for power and, in some cases, even more.
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Experts and analysts see the tariff revisions as a positive development for the sector, coming in the backdrop of efforts to bail out beleaguered discoms through a restructuring of their short-term loans, one of the most important policy initiatives of the government. These companies owe Rs.2 trillion to banks and financial institutions.
A landmark judgement of the Appellate Tribunal for Electricity (Aptel) has also helped. In the past, discoms didn’t file tariff applications before state electricity regulatory commissions (SERCs) because of political pressure. Aptel, in its judgement in late 2011 said SERCs could suo moto consider a revision in tariffs without any initiation from the state’s distribution company if they believe there is a revenue gap.
Pramod Deo, chairman of Central Electricity Regulatory Commission, said, “A lot has changed after the Aptel order.”
Those states that are yet to revise tariffs will soon do, said an expert.
“We are expecting all major states to come out with tariff orders for the financial year 2013-14 in the next two months. Other than the poll bound states, all other major states will continue the process of tariffs revisions to reflect costs incurred by their discoms,” said Debasish Mishra, senior director at Deloitte.
The other states and UTs that are expected to raise tariffs are Tripura, Tamil Nadu, Kerala, Maharashtra, Jharkhand, Goa, Chandigarh, Chhattisgarh, Uttarakhand, Karnataka, Assam and West Bengal.
Explaining the rationale for increasing tariffs , Rajeev Sharma, chairman and managing director of Rural Electrification Corporation Ltd (REC), said: “It is because of reasons such as the restructuring of their short-term loan package offered by the Union government combined with the onset of summer.” Summer usually sees an increase in demand for power.
With attempts being made to bridge the gap between the cost of electricity procurement and tariff realization, the Union government’s bailout plan announced in September 2012 for discoms included regular tariff revisions as part of the conditionalities to be met.
“States will have to make payments for the power they require, hence the tariff increase,” REC’s Sharma added.
Many discoms are saddled with losses arising from theft, besides transmission and billing inefficiencies. Some regularly bought expensive power to tide over short-term deficits and didn’t revise rates in years.
“Healthy tariff revisions and implementation of debt restructuring package announced by central government would help many of the companies to come out of red and cover costs in the next 18 to 24 months. In addition, there is still large scope for reduction in aggregate technical and commercial losses in states such as Uttar Pradesh, Orissa, Madhya Pradesh, Bihar and others,” added Deloitte’s Mishra.
“However, one has to see whether the tariff hikes undertaken are adequate or not. If tariffs have not been increased for a long time, the quantum of tariff increase should be higher,” added Deo, chairman at India’s apex power sector regulator.
Many believe there are good times in store for the sector.
Mint quoted power secretary P. Uma Shankar on 5 April as saying that “We have turned the corner.”
B.P. Rao, chairman and managing director at state-owned Bharat Heavy Electricals Ltd, echoed that sentiment at a press conference last week: “In fact, the worst is over for the sector.”
The Union power ministry in its annual report released on Tuesday said that the total electricity generation in the country increased from 420.6 billion units during 1997-98 to 607.168 billion units during April-November 2012.
Power minister Jyotiraditya Scindia has advised caution and restraint in tariff increases. He said on 10 April that operational efficiencies must be improved to narrow losses and the tariff increase must be the last resort.
The cumulative losses of the discoms increased from Rs.1.22 trillion in 2009-10 to Rs.1.9 trillion as of March 2011.
The AAP said that such increase in the rate of electricity charges was a national issue and needs to be taken cognizance of.
“This is definitely a national issue and there is no doubt about it. We have been saying that if residents are charged properly, such frauds would decrease. What is more important is that the reasons given by private companies for such hikes are never convincing,” said Sanjay Singh, official spokesperson of the party.
Also, Pawan Arora, president of Lajpat Nagar United Societies, an association of around 20 small resident welfare associations (RWAs) in New Delhi, said that frequent hikes are not appreciated by RWAs all over Delhi. “I don’t deny that the quality has improved over the years and we have less power cuts. But there are still unauthorized areas and slum clusters that are getting free electricity. If electricity distribution has been privatized, then the companies should do a proper check. We are paying for them as well. Some areas are using more than the sanctioned load and no one is talking about the underlying reasons behind the hike,” he said.
Rajiv Kakria, member of Greater Kailash-I RWA, said, “There is no scientific system, no prudent checks. DERC (Delhi Electricity Regulatory Commission) hasn’t laid out any transparent systems for increase in power tariffs. Purpose of DERC is to be the watchdog for the consumers and they are practically playing in the hands of discoms to benefit them. They have thrown all norms out of the window.”
Maulik Pathak in Ahmedabad, and Anuja and Neha Sethi in New Delhi contributed to this story.
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First Published: Wed, Apr 17 2013. 12 11 AM IST
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