Relief in power tariff for industries in Maharashtra too little, too late

Maharashtra government announced cheaper power tariffs for industries in Vidarbha, Marathwada, North Maharashtra, and industrial zones designated as D and D+


Currently, around 4.13 lakh industrial consumers in Maharashtra are charged power tariff in the range of Rs8.23 to Rs13 per unit depending on their consumption. Photo: Indranil Bhoumik/Mint
Currently, around 4.13 lakh industrial consumers in Maharashtra are charged power tariff in the range of Rs8.23 to Rs13 per unit depending on their consumption. Photo: Indranil Bhoumik/Mint

Mumbai: The Maharashtra government’s latest power tariff incentives for industries may still not make the state a competitive destination as compared to neighbouring states which offer cheaper rates, industry executives said. Last week, the state announced cheaper power tariffs for industries in Vidarbha, Marathwada, North Maharashtra, and industrial zones designated as D and D+. State energy minister Chandrashekhar Bawankule said this has been done to disperse industry from the A, B, and C, zones which comprise regions such as Mumbai metropolitan area, Pune, and Nashik districts to the less developed regions of Vidarbha, Marathwada, and North Maharashtra.

“In the 2016-17 budget, we have already earmarked Rs.1,011 crore, which the state would give as a direct subsidy to the power distribution utility on account of reduced power tariff for these regions. This incentive would also trigger competition among regions to get investment and also encourage investors to look at newer areas for investment,” Bawankule said.

Currently, around 4.13 lakh industrial consumers in Maharashtra are charged power tariff in the range of Rs.8.23 to Rs.13 per unit depending on their consumption. Relief has been offered on these tariff bands in select regions with effect from 1 April this year. In Vidarbha, existing and new industrial consumers will get a relief of Rs.1.25 to Rs.1.75 per unit. In Marathwada region which is drought-prone, the benefit per unit is Rs.1.50. North Maharashtra and areas designated D and D+ will get a per unit relief of 50 paise to Rs.1.

The regions selected for relief in power tariff account for a third or Rs.2,000 crore of state-owned Maharashtra Discom’s total annual revenue of Rs.6,000 crore from industrial consumers.

Nagpur-based industrialist and chairman of Vidarbha Industry Association’s energy forum R.B. Goenka said the incentives will help existing and new industry in these regions and also bring back those consumers to Maha Discom who are currently buying power from other sellers using the open access facility. He said many high tension users—those industries which consume more than 1 lakh units per month—had ceased to be Maha Discom’s consumers in the last four years due to high tariff. “They will come back now since the Maha Discom has offered competitive tariff. The rate that industrial consumers are paying to buy power from open access is cheaper compared to Maha Discom’s tariff. But other sellers may lose their competitive edge now with the relief in Maha Discom’s tariff,” Goenka said.

Goenka, who is an independent director on Maha Discom, said reduction in consumption by industrial users had caused losses to Maha Discom. “This happened because several high net industrial consumers left Maha Discom to buy power from others,” he said. Between 2010 and 2015, Maha Discom saw a nearly 10% drop in the share of energy consumption by high tension consumers across the state.

Welcoming the sop for industrially backward regions, Pratap Hogade, power sector expert and president of Maharashtra Electricity Consumers Association, however, said the relief was ‘meagre’ if one takes into account the hike in tariff proposed by Maha Discom for the next four financial years starting 2016-17.

In March, Maha Discom proposed an average tariff increase of 5.5% across its range of 25 million consumers to meet revenue deficit of Rs.38,987 crore accumulated over the years mainly due to the higher cost of power purchase and arrears on account of subsidies declared from time to time to agriculture consumers. The proposal is pending for approval with the Maharashtra Electricity Regulatory Commission (MERC). Hogade said Maha Discom had proposed to raise tariff for industrial consumers by 50 paise per unit in 2016-17 to Rs.2 in 2020 across the state. “If Maha Discom’s proposal is accepted, the effective relief in tariff for industrial consumers in backward regions would be 30 paise to 60 paise per unit which is so meagre that it won’t help the state achieve industrial progress in these zones,” Hogade said.

A spokesperson for Maha Discom, however, insisted that the proposal for tariff increase had not yet been accepted by the MERC. “We have only submitted our revenue plan and we can’t assume that it will get accepted. The MERC has rarely conceded to Maha Discom’s demands for tariff increase. For instance, in 2015-16 the MERC actually ordered a 5.75% cut in tariff when we had demanded a 7.94% increase,” said the spokesperson.

Hogade said the tariff for industry in Maharashtra continued to be higher as compared to the neighbouring states even if one accepted Maha Discom’s contention that the increase in tariff was not effective yet. Tariff for industrial consumers in Maharashtra was 25% to 45% higher as compared to states like Karnataka, Gujarat, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, and Goa, Hogade said.

“The relief for backward regions is welcome. But industries in the designated A, B, and C areas—which comprise the core of Maharashtra’s manufacturing might and account for nearly 50% of Maha Discom’s revenue from industrial users are still subjected to expensive tariff. The base tariff for high tension and low tension industrial consumers in these regions is still Rs.8.23 and Rs.9.31 per unit respectively. Add to this the fuel adjustment charge of 90 paise to Rs.1 per unit. None of the six neighbouring states has industrial tariff more than Rs.6.80 per unit while some have it as low as Rs.4.80 and Rs.5.5. Even if the proposal for tariff hike is rejected by MERC, the current rate for the bulk of industrial consumers continues to be high,” Hogade said. He said as a result of Maha Discom’s higher tariff, more than 500 big industrial consumers have stopped buying power from the state utility. “The industries that have left Maha Discom and moved to other distributors under the open access system include big names like Mahindra, Tata Motors, Essar Steel, Garware, Kirloskar, Jindal Polyfilms, and CEAT. It is a major loss to the state distributor,” Hogade said.

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