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This year, the time-bound process of orders on new rates for the power sector has been skipped, following the Election Commission issuing a directive stalling any such move.
Though state regulators, at times, come out with tariff awards after April 1, new rates are, by and large, applicable across states from this deadline. However, if this year is taken as a precedent, this deadline could be a non-event every five years.
Following the Election Commission’s March 29 notification, orders on new rates have been held up in several states, including Punjab, Odisha, Karnataka, Andhra Pradesh and Assam. In Madhya Pradesh, even a zero-rate rise for 2014-15 has not been notified because of the Election Commission directive. For the procurement of solar power in the state, too, the power regulator had to issue a clarification, stating because of the model code of conduct, a fresh order on rates beyond March 31, 2014, would not be issued; the previous order in this regard order would apply to solar projects in the state.
Though the model code of conduct applies to political parties and candidates, with special directions for the party in power, it is silent on its applicability to sectoral regulators. “As new tariff orders are a regular process outside the political scheme of things, there seems to be no rationale for the Election Commission’s action. Moreover, the idea of a model code of conduct is to prevent political mileage from decisions made by the government,” said Manu Srivastava, managing director, Madhya Pradesh Power Management Company, the holding company for three power distribution companies in the state.
The Election Commission notification asking state regulators not to bring out tariff awards (though they could continue with other aspects of the process) came just three days before the new rates for power were to become effective across many states. In Karnataka, all the five distribution companies filed petitions before Karnataka Electricity Regulatory Commission (KERC) on December 13, 2013, seeking an increase of 66 paise a unit for all categories, barring irrigation pump sets with a capacity of less than 10 hp and Bhagya/Kutir Jyothi consumers. KERC had to pronounce its decision on the petitions within 120 days, after considering the views of consumers and experts, through public hearings and verification of all documents.
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In Karnataka, the previous revision in rates, too, was hit by the state Assembly elections.
“Sector regulators are independent statutory bodies, with a clearly defined timeline for tariff reviews, and there’s no reason not to follow the complete process of filing, public consultations, and finalising the revenue requirement,” said Kameswara Rao, leader (energy, utilities and mining), PricewaterhouseCoopers. Rao added tariff notification alone could be kept on hold, as a new government in a state would need to commit subsidy. "But in states that are not re-electing governments, notifications, too, should ideally proceed, as scheduled."
Experts, however, view as different the Election Commission's decision to disallow gas-producing companies an increase in price from April 1, despite Reliance Industries Ltd having to extend its gas sales purchase agreements that expired on March 31. "There is justification in putting on hold decisions that are solely taken by the government, such as on gas price. This is unlike the case with power tariffs determined by independent regulators, staffed by technical, legal or administrative professionals and follow a clearly specified and transparent process to make their decisions," said Rao.
Ridiculing the Election Commission's move on tariff orders, a senior state government official said asking power regulators to hold orders was akin to asking courts not to pronounce judgment till the election process was over. Rao, too, emphasised the need to uphold institutional processes.
Delays in tariff notification will directly impact the finances of all state distribution companies and state generating companies. Central utilities and private generating companies, however, have completed their rate-revision processes and have automated clauses in power purchase agreements and suffer no impact. "States that have deferred the filing process are the most impacted, while those delaying final tariff notifications will see no revenue increase for three to four months."
