Mumbai: Power companies don't see eye to eye over uniform tariff

May 27, 2016, 08:25 IST | Dharmendra Jore

Reliance and BEST say the move will hit them hard and will be against the spirit of competition; Tata Power okay with plan

The state government’s plan to have a uniform power tariff for Mumbai consumers who use 500 units per month will remain a mirage. A meeting on the proposal held yesterday at the CM’s office was inconclusive because of difference of opinion among distribution companies. They fear that the proposal, if implemented, will ruin the spirit of competition in the sector because of an adverse impact on some companies’ finances.

Pic for Representation

The government has asked for suggestions on a uniform tariff for those who consume 0-500 units per month, and has also appointed a private consultant to study the proposal and come up with a feasible plan. The consultant is reported to have come up with an idea that having a uniform tariff for consumption of up to 100 units per month is a better idea, instead of going in for the 500-unit slab.

Losses will mount
However, some companies like Reliance Infra and BEST did not approve of the consultants’ suggestion, fearing that it would take a toll on their finances.

A senior officer who attended the meeting said Reliance alone would suffer an annual loss of Rs 150 crore even if a uniform tariff is charged for 0-100 units. Its loss would increase to Rs 357 crore if the plan is put in place for 0-300 units, said the officer.

Wary of further deterioration of its dismal finances, BEST, too, did not support the idea of a uniform tariff for 0-500 units.

However, Tata Power supported the idea and offered some options to the government, including management of funds generated through a uniform tariff by all companies.

But Reliance and BEST scuttled the plan, insisting that the uniform tariff is against the spirit of competition advocated by the Electricity Act, 2003.

A representative from one of the participating companies told mid-day that the easiest way to have a uniform tariff is through a government subsidy.

“If the government can give subsidy to its own distribution company Mahavitaran (which caters to the eastern suburbs), then it must give subsidy to the private players as well. It cannot discriminate against Mumbai consumers.”

In light of the deadlock, Chief Minister Devendra Fadnavis suggested that 0-100 be considered for arriving at some conclusion. He asked for a report on this at the earliest.

In poll mode
For the government, the proposal is politically important ahead of the BMC election set for next year, as it wants to appease the middle-class voters. In January this year, Congress vice-president Rahul Gandhi had led a padyatra from Bandra to Dharavi against the tariff hike.

But the government and the companies cannot alone decide the uniform tariff regime. The Maharashtra Electricity Regulatory Commission (MERC) will have to approve the proposal whenever it is tabled for consideration.

In 2008, the MERC had said a uniform tariff across different companies was not possible due to inherent differences, such as revenue requirement, consumer mix and consumption mix. It had again told the state in 2011 that the government support in the form of subsidy under Section 65 of the Electricity Act, 2003, was the only method to implement a uniform tariff in Mumbai.

Energy Minister Chandrashekhar Bawankule told mid-day that the final decision would be taken only after receiving the private consultant’s report.

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