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Maharashtra proposes 35% rise in electricity tariff for domestic consumers

As Panchabuta has earlier reported, several financial institutions have decided to stop disbursing short-term loans to power distributors in five states where the losses of utilities have exceeded Rs 5,000 crore each, raising fears of prolonged blackouts and weaker electricity demand. The affected states are Tamil Nadu, Haryana, Rajasthan, Uttar Pradesh and Punjab.

Losses of state electricity boards are projected to double to Rs 150,000 crore by 2014-15, creating an alarming situation for the sector as these utilities are the vital link between producers and consumers.

According to reports, the Maharashtra State Electricity Distribution Company Limited ( MSEDCL) has proposed a hefty 35% rise in electricity tariff for domestic consumers using 100 units per month in its tariff proposal for 2010-11, submitted to the Maharashtra Electricity Regulatory Commission (MERC).

The tariff increase proposed for other consumption categories comes to about 10 to 12%. The fixed charges for all categories of consumers are proposed to be increased by 100%.

The tariff proposal submitted to the regulator seeks to mop up Rs 4,620 crore revenue through increase in tariff and another Rs 487 crore (total Rs 5,097 crore) which is to be paid to Maharashtra State Power Generation Company Limited ( MAHAGENGO) following directive of the electricity appellate tribunal.

The tariff proposal said the distribution company wished to increase the per unit tariff for domestic consumers using 100 units per month to Rs 4 per unit from the existing Rs 2.86. “The rate has to be brought to the level of actual per unit cost of power purchase,” the proposal said. Domestic consumers who use 500to 1,000 units per month have been brought to the same level as housing complexes.

The distribution company has proposed a significant increase in concession given to high-tension industrial consumers for their electricity consumption during 10 pm to 6 am. At present, these industries get a concession of 85 paise per unit for power consumed after 10 pm, which is proposed to be increased to Rs 2.50 per unit.

The company has not proposed any tariff increase for below poverty line consumers, advertisement/hoardings and crematorium/burial grounds.

Reacting to the tariff proposal, Shantanu Dixit of the Prayas Energy Group said the hefty tariff increase for small domestic consumers (who use 100 units) is contradictory to the distribution company’s stand of not reducing cross subsidy till the government comes up with a roadmap for cross subsidy reduction.

“The distribution company pressed for cross subsidy surcharge from industries that opt for open access (buy power from other source and not the distribution company) so that common consumers are not burdened with higher tariff. But the distribution company seems to have withdrawn the cross subsidy in the proposal by proposing tariff of Rs 4 per unit for small domestic consumers,” he said.

Dixit said as big industries will move towards open access option, small domestic and commercial consumers will have to bear an increasing burden of higher power tariff in years to come.

“Once industries opt for open access, the distribution company’s revenue realisation from industries will be affected in a major way. The cushion of industries for absorbing the burden of higher tariff to allow cross subsidy for domestic consumers will not be there. In addition, the distribution company’s expenditure on infrastructure development and power purchase will also go up,” he explained.

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