December , 2019
The curious case of power tariffs across states
16:41 pm

Ankit Singh

There are numerous categories and sub-categories in the tariff structures, with no consistency among states, adding to the complexity of the tariff structure in the Indian power sector. In case of domestic consumption, rate per unit of electricity in West Bengal is considered to be comparatively higher.

The domestic LT rate of West Bengal State Electricity Distribution Company Limited (WBSEDCL) is Rs. 7.31, of India Power Corporation Limited (IPCL) is Rs. 6.13, and of Damodar Valley Corporation (DVC) is Rs. 4.66 in the Asansol and Durgapur divisions. The domestic LT rate of Calcutta Electric Supply Corporation (CESC) in the Kolkata and Howrah division is Rs. 8.92.

The recently announced power tariff by the Delhi state government for domestic consumption is Rs. 6.5 which was reduced from Rs. 8.5. In down south, the domestic LT rate fixed by the five distribution companies in Karnataka is the same and is at Rs. 7.02. So, why is the tariff rate fixed by the CESC for Kolkata and Howrah much higher than the rates allotted by DVC and IPCL in the Asansol division? What made it possible for the Delhi government to reduce tariff rates while DISCOMs in all the states have been complaining of record debts and significant power loss? How can all the distribution companies in the state of Karnataka agree upon a fixed consumption rate when the tariff rates of DVC, IPCL, CESC and WBSEDCL in West Bengal remains erratic and divergent?

Industry insiders believe that while India has recently seen great gains in generation capacity and rural electrification, many utilities are still trapped in a vicious cycle of underpayment, low capacity utilisation and in dismal performance. Experts believe that the electricity subsidies and inefficient power generation, transmission, and distribution cost billions to the companies and boards involved in the sector. In general, industrial and commercial consumers subsidise domestic and agricultural consumers. The companies face issues in distribution of power due to lack of infrastructure and ineffective regulations, even after the implementation of the new Electricity Act of 2003. This results in power losses, blackouts and other distortions in the power sector.

In case of West Bengal, the absence of parallel license for distribution in certain divisions has resulted in high tariff rates for the consumers. This is particularly true of the case of Kolkata and Howrah divisions, which is monopolised by CESC.

With different players acquiring licenses to generate, distribute and transmit electricity, the rates remain competitive for certain other divisions. So, the lower rates of power tariff in the Asansol and Durgapur division is because of parallel distribution by DVC, IPCL, and WBSEDCL in the region. The state government may look at this option to reduce the power tariffs in Kolkata and Howrah, where the rates are among the highest in India. Allowing multiple players in these divisions may pull down the tariff rates and pass on the benefit to the consumers. 

However, the biggest problem in India’s power sector is theft and giveaways. It is deemed impossible to charge farmers anything at all for the power they consume. Where farm power is free and unmetered, it is common for local industries to draw a line from the pump set to run its own operations free of charge as well. Residences and shops in towns feel they can get away with stealing power, so long as they can pay off personnel of the state distribution utility and the local power brokers. Fixing the power sector is not a question of financial or electrical engineering. Primarily, it is of politics, of summoning the courage to tell consumers clearly and firmly that they have to pay for the power they consume.

It has been reported that government giveaways such as free electricity for farmers, created partly to curry political favour, have depleted the cash reserves of state-run electricity-distribution systems and led to debts of  Rs. 2.5 trillion ($36 billion). This has financially crippled the distribution network, and its ability to pay to purchase power in the absence of subsidies from state governments. This situation has been worsened by state government departments that do not pay their electricity bills. The private companies have to follow a different mechanism to recover costs, and have resorted to concepts like monthly minimum charge for domestic consumers. The inability or refusal of state governments to increase power bills has led to more borrowing and power shortages and made DISCOMs reluctant to buy available electricity. This has led to under production and stagnant tariff rates.


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