Power ministry wants states to regularly revise power tariff

16 Jun 2014

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The union power ministry wants state regulators to revise electricity tariff on a regular basis, on the lines of fuel price revision by oil marketing companies, to provide for cost escalation of generation companies and distribution utilities.

In its planned presentation to Prime Minister Narendra Modi, the ministry has proposed amendments to the Electricity Act, 2003 to usher in the next wave of reforms in the power sector.

The ministry's argument is that power being a concurrent subject, state regulators have an important role to play. Also, according to the ministry, regular tariff revisions will protect consumers from sudden, steep hikes in their electricity bills.

The ministry also wants the state regulators to permit automatic fuel cost adjustments in order to avoid time lags in offsetting cost impact on tariff.

Much of the power, ie over 57 per cent, generated in the country is from coal-based power plants and coal prices in India have gone up 30 per cent over the last three years.

However, some of the state electricity regulatory commissions have shied away from increasing tariffs due to political reasons, power ministry officials point out. Loss-making distribution utilities now find it difficult to pay for electricity which has also turned expensive.

States such as Haryana had not revised tariffs for nearly a decade, they say.

The Central Electricity Regulatory Commission (CERC) undertakes a tariff revision annually while the tariff determination principles are revised every five years.

''We revise our tariffs every year,'' said SK Chatterjee, joint chief (regulatory affairs) at CERC. However, CERC has powers to regulate the tariffs of central generating stations as well as for all inter-state generation, transmission and supply of power.

Ashok Kumar Khurana, director-general, Association of Power Producers, said the majority of the issues plaguing the sector would disappear if all stakeholders, including the centre, states, and private/public sector utilities implement the Electricity Act in spirit and not in form.

''In fact, not even 40 per cent of the Act has been implemented,'' he said, adding that in some states, cross subsidisation is to an extent that it is not sustainable in the long run, making the industry uncompetitive.

Agriculture and household consumers are sold electricity at much lower rates than the commercial users, Khurana added. ''The Act says cross subsidisation should be progressive. The Act came into existence in 2003 and we are into 2014 now, but it has not happened and in fact it has increased in many states.'' he said.

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