Maharashtra may hike industrial and commercial power tariffs

Regulator may approve hike in tariff of industrial and commercial consumers to cross subsidize residential consumers

Electricity consumers in Mumbai with a monthly consumption of up to 500 units may have to wait for 50 per cent cut in power tariff. However, preliminary estimates — made internally by power distribution companies Tata Power and Reliance Infrastructure, BrihanMumbai Electric Supply and Transport (BEST) and the state energy department — show tariff reduction for the consumer categories of 0-100 units, 101-300 units and 301-500 units will cost the distribution companies about Rs 300 crore per annum.

These companies will be entitled to get a subsidy to make up the possible loss in their revenue as per the provisions of the Electricity Act of 2003. The reduction will be possible only in variable charge component of the per unit tariff. The other option is: The regulators can increase tariff for other categories such as industrial and commercial to compensate for lower electricity charges for domestic consumers.

A senior minister, who did not want to be identified, told Business Standard: “The issue will be discussed threadbare at the cabinet before taking any formal decision on tariff cut.”

Tata Power and Reliance Infrastructure are tight-lipped on the politically sensitive issue. However, officials of both the companies cite the sections 65 and 108 of the Act. According to section 65, the state government can grant subsidy to any consumer or class of consumers in the tariff determined by the power regulator.

Under section 108, the state government give direction to the state power regulator in the matters of policy involving public interest. BEST officials argued it would have to make up for the loss incurred by its transport wing with its revenues from power distribution.

However, the ruling NCP, which also holds the energy portfolio, has publicly opposed any move to provide subsidy to private distribution companies in Mumbai, including Tata Power and Reliance Infrastructure.

Tata Power has a consumer base of 425,000, of which nearly 250,000 are residential consumers. Of these, 100,000 consumers have a monthly consumption of up to 500 units. As far as Reliance Infrastructure is concerned, of the total consumers of 2.8 million, 2.3 million are residential of which 1.7 million consume up to 500 units a month. In the case of BEST, which is a part of the BrihanMumbai Municipal Corporation, it has a consumer base of one million, of which 765,000 are residential and nearly 660,000 consumers consume up to 300 units a month.

According to the Maharashtra Electricity Regulatory Commission’s (MERC) multi-year tariff (MYT) orders, Tata Power’s average billing rate (ABR) for 2013-14 is Rs 6.35 per unit, Rs 7.10 per unit for 2014-15 and Rs 7.89 per unit for 2015-16. Reliance Infrastructure's ABR is Rs 7.98 per unit for 2013-14, Rs 7.04 per unit for 2014-15 and Rs 6.23 per unit for 2015-16, while, for BEST, it is Rs 9.97 per unit, Rs 10.93 per unit and Rs 11.94 per unit, respectively.

Tata Power and Reliance Infrastructure are tight lipped on the politically sensitive issue of tariff cut in Mumbai. However, officials of both the companies cite the sections 65  and 108 of the Electricity Act.  As per the section 65, the state government can grant subsidy to any consumer or class of consumers in the tariff determined by the power regulator. On the other hand, under section 108 the state government has give direction to the state power regulator in the matters of policy involving public interest.