Home >Politics >Policy >The rich should subsidize power bills of the poor: Economic Survey

New Delhi: State electricity regulators should use income as a yardstick to fix the power tariff for individual consumers so that the burden of subsidising poor consumers can shift from industrial consumers to rich individuals, the Economic Survey said on Friday.

The move would help businesses become more competitive, it added.

Making a strong case for getting rich individuals to take on the burden of paying a part of the power bill of the poor, the Survey said that power tariffs sanctioned by state electricity regulatory commissions for different classes of consumers in India appear to discriminate much less between the rich and the poor than in some other countries.

“This leaves scope for greater exploitation of progressivity (the higher the consumption, the higher the tariff for each unit consumed)," the Survey said.

Bangladesh, Sri Lanka, South Korea, Vietnam and Brazil appear to better exploit the “progressivity" of electricity tariffs in the domestic category, it said.

Higher industrial power tariffs and erratic supply will have an adverse effect on the government’s Make in India campaign, the Survey warned. It suggested that a more progressive power tariff will help distribution companies recover their cost of supply and give relief to the poor without unduly burdening the rich.

“State regulators can make greater use of economic theory and its applications to design more effective and politically palatable policies," said the Survey.

Currently power consumption above a certain threshold attracts a higher tariff per unit consumed, but the Survey wants the tariff differences at different levels of consumption to be more pronounced.

Electricity being a state subject, state regulators have the exclusive power to fix tariffs. The central government, however, exerts a persuasive influence through its interactions with a forum of regulators.

The Survey also proposed that power tariff should be simplified to two or three slabs to improve transparency and efficiency of recovery. At present, some states have as many as 40 classes of consumers depending on consumption and end-use.

The Survey made a strong case for facilitating the sale of power by producers to industrial consumers through competitive bidding so that their surplus power-generating capacity after meeting demand from long-term customers can be put to efficient use.

At present, loss-making state electricity boards prefer power cuts rather than buying power at prevailing rates, which forces producers to run their plants below full capacity.

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