India’s rising power tariffs

Secret behind India’s rising power tariffs

By Mail Today Non-availibility of fuel, especially coal and gas, and

mounting losses of State Electricity Boards (SEBs), which are accumulating

bank’s rising advances of over Rs 80,000 crore, has prompted many states to hike power tariffs. Worst, power companies don’t have fuel to generate power this summer.

While Haryana Energy Regulatory Commission ( HERC) has hiked

power tariff by around 10 to 15 per cent, Tamil Nadu Electricity Board has

hiked power tariff steeply by 37 per cent. Other states like Andhra Pradesh and

Odisha have raised tariffs up to 25 percent while Bihar by over 

12 per cent.

Even a small state like Tripura has hiked tariff by 17 per cent. Punjab State

Power Corporation Limited has filed a petition demanding for hike in power

tariff by 55 per cent for 2012- 13. 

According to chief executive of 

Central Electricity

Regulatory Commission (CERC) Pramod Deo, Uttar Pradesh and Rajasthan may also

hike tariffs. Union power ministry officials said that the hike was imminent as

most states have not revised tariffs for a long time. The ministry of power had

earlier advised all states to write- off their cumulative losses, which have

crossed over one lakh crore during the last fiscal. The writing off of losses

would also help these SEBs and discoms, which are in the red, 

to increase

tariffs in line with the Central Electricity Regulatory Commission (CERC),

which has been asking states to correct the cost of procurement of power and

tariff mismatches.

According to S. K. Tuteja, member of the Shunglu Committee,

which recently submitted its report on SEBs, the move is encouraging. 

“ But weneed to get more private investment in the distribution sector and improve technology for private distributors to minimise their transmission and distribution losses,” he says. The tariff hikes and better implementation of technology is required to facilitate restructuring of almost Rs 80,000 crore

worth of loans that SEBs have, 

Tuteja added.

The Rural Electrification Corporation, one of the biggest

lenders to the sector, has an exposure of Rs 9,000 crore to Tamil Nadu, Rs

6,000 crore to Andhra Pradesh and Rs 1,000 crore to Rajasthan. In Uttar

Pradesh, its exposure is Rs 6,000 crore. Similarly, other states too have

massively lent from REC.

When asked about the tariff hike, the director general of

Association of Powerw Producers, Ashok Khurana, said that it will help them purchase gas and coal. “ There will be shortage of fuel for power companies during the 12 th plan period as well. The trend to hike tariffs is positive. You do not have adequate domestic supply of coal and gas, but by increasing tariff in next few years, power companies will definitely be able to import gas and coal, which are expensive. They will, at least, not shut down operations due to

non- availability of coal or gas. At least, 40,000 MW of coal and gas combine

units are working at sub- optimal level, which is around 50 per cent,” 

he added.