Maharashtra follows Gujarat, Delhi, may hike power rates

Power users in Thane, Navi Mumbai, Kalyan-Dombivili, Kanjurmarg, Mulund, Bhandup and Raigad, beware: If the Maharashtra State Electricity Distribution Company Ltd (MSEDCL) has it way, you could soon see a hike of 40 percent in per unit charges in your bill if you consume up to 100 units. Plus, if you're a residential user, your fixed monthly charge will double to Rs 60, according to media reports.

 Maharashtra follows Gujarat, Delhi, may hike power rates

According to a recent report by UBS Securities, Rajasthan and Tamil Nadu are likely to be among the next state SEBs to raise tariffs by 12-14 percent. Reuters

The hike is expected to affect about 50 lakh homes. According to the MSEDCL's tariff proposal, the per-unit charge for consumers using up to 100 units of power will be increased to Rs 4 from Rs 2.86 while for users using 101-300 units, it will jump to Rs 5.05 from Rs 4.86 per unit.

For users consuming 301-500 units, the unit charge will rise to Rs 7.05 from Rs 6.84 while for 500-1,000 unit-consuming users, it will advance to Rs 8.1 from Rs 7.9 per unit. Users with more than 1,000 units will be charged Rs 8.35 per unit, up from Rs 8.16. The charges include a fuel adjustment cost of 25 paise per unit.

The hikes are aimed at reducing the MSEDCL's revenue gap of more than Rs 5,100 crore. The final tariffs will be announced by the Maharashtra Electricity Regulatory Commission (MERC).

The MSEDCL's proposal to hike tariffs comes on the heels of a decision by the Gujarat Electricity Regulatory Commission on 7 September to increase tariffs for consumers in the state's capital by an average of 22 paise per unit, or 4.68 percent higher than the existing rate. The earlier week, the Delhi government also jacked up tariffs by 22 percent while Punjab's state electricity regulator proposed a rise of 7-12 percent. In a recent story, Firstpost had said state electricity boards (SEBs) would increase their pace of hiking rates.

According to a recent report by UBS Securities, Rajasthan and Tamil Nadu are likely to be among the next state SEBs to raise tariffs by 12-14 percent.

The rush to raise tariff rates is not unsusual - most analysts and industry observers have been expecting it for a while now. UBS points out that at least 16 out of 28 states have either proposed or implemented power tariff hikes over the past six months. These states account for 80 percent of power consumers.

The reason for the hikes is simple: most SEBs are struggling with increasing costs, and many of them are loss-making. According to the finance ministry, if tariffs are not hiked, SEBs are expected to suffer annual losses of Rs 1,16,089 crore by March 2015.

The losses of SEBs have been spiralling due to the higher costs of power they purchase - 62 percent of SEB costs relate to payments for purchasing power - and higher employee costs due to the implementation of the Sixth Pay Commission. In addition, the reluctance of state governments to raise power rates despite a provision in the Electricity Supply Act mandating that made things worse. While aggregate costs of power supply went up 16.5 percent between 2007 and 2009, tariffs did not keep pace and grew only 6.5 percent. Now with states warned that they cannot expect any help from the central government, local governments have been left with little option but to go for a hike in tariffs.

Indeed, Firstpost had pointed out as early as Maythat the Delhi Electricity Regulatory Commission would simply have to raise tariffs, given thatprivate companies that were distributing power were running at losses of nearly 20 percent. This was after Reliance Infra's dire warning that prices simply had to move north. Given that the privatisation of power distribution was a much celebrated project of the Delhi government, it was unlikely that they would have let it fail.

In Maharashtra, MSEDCL has two crore consumers; 1.5 crore of them are residential consumers, of which 1.01 crore consume up to 100 units a month while another 33 lakh consume 100-300 units a month.

Residential consumers owe more than Rs 700 crore to the SEB while commercial consumers owe about Rs 550 crore. The dues of agricultural consumers are much higher - about Rs 6,000 crore. MERC has invited suggestions and objections from the public on the proposal.

The president of the Maharashtra State Power Consumers' Association, Pratap Hogade, told DNA that after taking into account the proposed increase in fixed charges, the effective tariff hike for consumers who use up to 100 units is 55 percent.

Suggestions and objections may be sent to the secretary, Maharashtra Electricity Regulatory Commission, 13th Floor, Centre No 1, World Trade Centre, Cuffe Parade, Mumbai, 400005 and by email to mercindia@mercindia.org.in by Friday, September 30. The petition document is available on MSEDCL's website www.mahadiscom.in.

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Updated Date: Dec 20, 2014 04:21:02 IST