If Shinde allows power producers to hike tariffs, will consumers pay?

Is this for real?

Will the government really allow power producers to hike tariffs to match rising fuel costs in new projects?

Higher tariffs to matching rising fuel supply costs has been a long-standing demand for power companies.

That wish may finally be granted, according to a report in The Economic Times. "The power ministry will allow producers to raise tariffs if fuel costs of new projects rise, and will not oppose a hike in domestic gas prices," the report said. "The move would hurt consumers but rescue large private investments that are threatened by uncertainty over fuel and tariffs."

 If Shinde allows power producers to hike tariffs, will consumers pay?

Shinde says the power ministry will allow producers to raise tariffs if fuel costs of new projects rise.

The hike in tariffs will be allowed for new large or ultra-mega power plants yet to be awarded, and gas fired electricity plants with a capacity of over 7,000 megawatts already constructed but idling because of fuel scarcity, power minister Sushilkumar Shinde told the newspaper.

The question is will it actually happen? Allowing an increase in power tariffs has been resisted for a long time on political grounds.

It's the reason why state electricity boards, the main clients of power producers have accumulated losses of more than Rs 1 lakh crore.

It seems highly unlikely that end users will be made to pay higher prices for the power they use, which makes it highly unlikely that power producers will swallow higher tariffs if they can't pass on these costs to end-users.

We'll have to wait and watch.

Updated Date: Dec 20, 2014 09:57:58 IST