Maharashtra slashes power tariff by 20%

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Replicating what the Aam Aadmi Party government has done in Delhi, the Congress-led Maharashtra government has decided to cut power tariffs by 20 per cent in the state for residential, commercial, agriculture and industrial consumers. The cut will not benefit residents and establishments in the city of Mumbai, though those in the suburbs of Navi Mumbai and Thane will gain.

In the residential category, only those consumers consuming up to 300 units of electricity would get a 20 per cent reduction, while others will have to pay at existing rates. However, there is no limit for other category consumers.

The cost of subsidising the consumers would be around Rs 760 crore per month, which would be shared by the government and the distribution and transmission arm of the state electricity board. The government would share around Rs 660 crore per month while the T&D arm would share the remaining Rs 100 crore per month, a statement issued by the state government mentioned. Unlike the Delhi government’s decision to provide subsidy for three months, there is no timeline given by the Maharashtra government.

The move follows the Narayan Rane Committee report on reduction of power tariff for consumers in the state, excluding Mumbai.

The report was initiated after the industrialists started to flee the state in the wake of tariff hike, which went up by around 20 per cent in September 2013.

The Maharashtra State Electricity Distribution Company (MSEDCL) spokesperson said the rates would be reduced by 20 per cent for industrial consumers from Rs 8.61 per unit to Rs 7.01 per unit, commercial rates from Rs 12.86 per unit to Rs 10.45 per unit, and for agricultural consumers from Rs 129-170 per horse power to Rs 101 -110 per horse power, while residential consumers using up to 100 units who were paying Rs 4.16 per unit will now pay Rs 3.36 per unit and consumers using 100-300 per unit will pay Rs 6.05 from the existing rate of Rs 7.42 per unit.

The Congress party, which has extended support to the Aam Aadmi Party in Delhi, does not want to be left behind in appeasing the electorate just months before the general elections.

The Aam Aadmi Party led by Arvind Kejriwal has held that power distribution companies in Delhi indulge in large-scale irregularities, which has led to increase in tariffs over the past couple of years. It has also pushed for audit of the accounts of the private discoms by the central auditor.

In contrast, power sector analysts believe that reversing the tariff hike would only increase problems for the industry reeling under severe financial crisis due to lack of fuel, as well as higher cost of imported fuel and equipment.

Anil Razdan, former power secretary in the Union government, told Financial Chronicle that the decisions were being taken in the wake of the forthcoming general election.

“But it’s a prerogative of the government in the interest of the state. It could be a good move provided the government gives the subsidy upfront to the distribution companies. The problem happens when the subsidy is delayed.”

“The government should also look at clearing the held-up coal projects so that domestic coal is available to the generation companies at lower rates. Besides, the contract should be given the L1 at the bidding stage, which would provide long-term supply of coal for 15-20 years at costs that are much lower than the contracts awarded to the highest bidder, who would then try to recover the cost from consumers later,” said Razdan.

Two private distribution companies, Tata Power and Reliance Infrastructure that distribute power in Mumbai, declined to comment on tariff cut.

Rupesh Sankhe, power sector analyst with Karvy Stock Broking, said there would not be any impact on the major private distributors such as Tata Power and Reliance Infrastructure, since they are not part of the overall tariff reduction in the state, but in the long term, the government may come down heavily on these distribution companies in the larger purported interest of the state’s consumers.

Maharashtra, excluding Mumbai, has a total of 2.14 crore power consumers, that include 1.56 crore residential consumers, with 1.30 crore consuming less than 300 units; around 16 lakh commercial consumers; 36 lakh agricultural consumers and 3 lakh industrial consumers.

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