Steep hike in power tariff

Putting the entire blame on the steep rise in coal price, the WBSEDCL, the largest electricity distribution company in West Bengal has decided to hike its power tariff by 78 paise per unit.

The CESC has also hiked its tariff by 48 paise. Thus, the electricity tariff in the state has been hiked for the second time in the current year. After the present hike in tariff, the WBSEDCL will charge its 70 lakh consumers Rs 4.27 per unit and the CESC will charge its 23 lakh consumers Rs 4.57 per unit.

Never before was the retail price of electricity hiked at this scale. The hike will be effective from November itself.

Anirban Guha, Director (Regulatory & Trading) of WBSEDCL, has justified this hike saying that WBSEDCL sources power primarily from thermal generating stations.

Hence, the sharp rise in the coal price in recent past affected the cost of generation adversely. Guha argued that ECL, one of the subsidiaries of Coal India, had almost doubled the prices for superior grade coal.

There has been 92% rise in Grade A coal from its earlier price of Rs 2,574 per tonne to Rs 4,950 per tonne, and 99.5% rise in Grade B and 104% rise in Grade C coal. For the first time, in a major departure from the administered pricing mechanism, the Union ministry of coal is forcing all thermal power generating companies to purchase about 40% of total coal required through MoU route.

Thus, the coal-rich states like West Bengal, Orissa, and Jharkhand are forced to purchase coal at a much higher rate. Guha says, "By introducing this MoU route for purchasing coal, the Centre has taken away the natural advantage of the coal producing states like West Bengal, Orissa and Jharkhand.

This is nothing but a back door re-entry of freight equalization policy."

According to the WBSEDCL, even with this hike in power tariff, the WBSEDCL is likely to post a loss between Rs 300 crore to Rs 500 crore in 2009-10. In the recent past, the WBSEDCL was one of the few state-run electricity companies in the country which made profit.

In 2008-09, the company posted profit to the tune of Rs 60 crore, and in the year before last, it posted profit of Rs 300 crore. Guha estimated that the present hike in tariff will generate additional revenue of Rs 430 crore in the remaining months of 2009-10, but that won't be enough to mop up the rising bill on account of coal purchase.

The additional revenue of CESC will be to the tune of Rs 116 crore. Both these power distribution companies were demanding the hike at a much higher rate than they were permitted by the Electricity Regulatory Commission. For example, the WBSEDCL had asked for a hike by Rs 1.40 per unit.

It has to be noted that the retail prices of some of the essential commodities like rice, sugar, pulses, mustard oil and potato have gone up in recent months. The hike in electricity tariff will only be an additional burden on the ordinary consumers.