Electricity tariffs are kept artificially low, says Tata Power

New Delhi: Country's largest private power producer Tata Power has said that electricity tariffs are "artificially kept low" while acknowledging that the sector is facing challenges across the value chain.

Tata Power, which has an installed generation capacity of 8,521 MW, has said that besides fuel issues, there are challenges in generation, transmission and distribution segments of the sector.

The domestic power sector, crucial for overall economic growth, continues to grapple with multiple woes. Government has been making efforts to address the issues including fuel shortages.

 Electricity tariffs are kept artificially low, says Tata Power

Representational image. Reuters

Listing out the sectoral challenges to the shareholders at the company's annual general meeting on August 16, Tata Power said that "power tariffs (are) artificially kept low". Besides, financial health of state electricity boards (SEBs), high aggregate technical and commercial losses and the SEBs resorting to load shedding during peak hours are the major challenges in the distribution segment.

The poor financial health of SEBs has been mainly blamed on lower tariff in comparison with generation costs. Besides, many states are providing subsidies on the balance sheets of discoms (SEBs), which are unable to hike tariffs.

Earlier this month, Power Minister Jyotiraditya Scindia had said that states should take the liability of electricity subsidies on their balance sheets instead of burdening the distribution companies (discoms).

To help the ailing SEBs, the central government has come out with financial restructuring package for them, which includes converting part of the discom's debt burden into bonds by respective state governments. The liabilities of discoms are estimated to be more than Rs 2 lakh crore.

On the fuel front, Tata Power has said there is "lack of sufficient growth in domestic coal production" apart from gas shortages and challenge posed by regulatory changes in markets such as Indonesia.

The viability of Tata Power's 4,000 MW Mundra ultra mega power project, which is fired by coal imported from Indonesia, has been hurt after that country's changed its norms for pricing of the dry fuel.

Following a plea from the company, in April this year, the Central Electricity Regulatory Commission (CERC) had directed the concerned parties to work out a compensatory tariff for power generated from Mundra project. A panel, set up in this regard, is deliberating on possible options.

Meanwhile, the company has cited lack of uniformity in the land acquisition policy framework, inordinate delays in environmental clearances and slow development of several transmission projects as other challenges facing the sector.


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Updated Date: Aug 18, 2013 12:36:50 IST