Free Press Journal

Will power tariffs go up?


Power tariffs are a worrisome topic for state policy makers, corporate accountants, entrepreneurs and economists.  They burden common consumers.  The beneficiaries are agriculturists and economically weaker sections who get subsidized power.  But power supplied to them gets stolen.  Transmission and distribution losses and subsidies have together created a national gaping hole of around Rs.4 lakh crore which state distribution companies must make up.

There are three alternatives before states: first, reduce losses and theft (often mis-declared as agriculture to escape detection). Second, reduce the subsidies. Third, increase power tariffs.  The third is difficult as Industry is already groaning under power tariffs of Rs.8-12 per kWh. You cannot have “Make in India’ without making industry competitive.  So, the state will have to act on the other two.

A Panel Discussion jointly organised by Free Press Journal and Indian Merchants’ ChamberTo discuss this, the FPJ-IMC Forum organized a panel discussion with experts at the Indian Merchants Chamber, Mumbai.  The panel comprised (in alphabetical order) Pramod Deo, Ex-Chairman, CERC;  Suhas Harinarayanan, Executive Director & Head of Research, JM Financial; Mukesh Khullar, Principal Secretary-Energy, Government of Maharashtra;  Anil Sardana, Managing Director, Tata Power Ltd; and Bipin Shrimali, Managing Director, MAHAGENCO.  The event was moderated by R.N.Bhaskar of FPJ with editorial support from Pankaj Joshi.

The welcome address was given by Dilip Piramal, president, IMC, and the Vote of thanks by Deepak Premnarayen.

Given below are edited excerpts:

FPJ: The government is talking of Make in India. Make in India does not become viable or feasible unless industry becomes competitive (internationally), (and) if the pricing of power is not reasonable.

Moreover, because of the subsidy regime that has been introduced by the government industry has to pay a higher price to cross subsidize all the cheaper power given to agriculturists and economic weaker sections. I would like the panelists to dwell on what the way out could be.

Anil Sardana:  Let me start by leading the context. When we talk about tariffs in Maharashtra, I think it’s important for us to understand the perspective in comparison, first of all, to international situation and then to our home markets.

Internationally, in most countries, the industrial tariff for economic reasons is actually the lowest tariff, and then the rest of the tariffs are away from average cost of supply. This is because the basic genesis is that the industry must contribute to economic prosperity and therefore, industries get the most economical and most competitive in terms of tariff.

In the Indian context, I think we have used the tenets of democracy, and kept the vote bank, since everybody ultimately is a residential customer. The residential customer therefore gets the benefit of the lowest competitive tariff, which is the most away from the average cost of supply that means, it’s the lowest from the average cost of supply.

In order to make things manageable, the industrial tariff is pushed up, the commercial tariff is further pushed up, which makes the two almost unsustainable in two aspects. One, the industry bears the brunt of paying higher for the raw material called power.

And number two, we have done a study– since I am also the Chairperson of CII –and found that in the five largest power consuming industries, if you compare with those five manufacturing sectors internationally – let’s say steel, cement, chemicals and two others large consuming sectors – Indian power tariff to those industries, which is like the raw material, are at least double, if not more when compared to other competing and competitive countries.

Read more on next page