Proposal revived for uniform power rate in Mumbai

Government asks distribution companies to come up with plan of action

The BJP (Bharatiya Janata Party)-led government has revived the proposal for uniform power tariff in Mumbai for consumers in the 0-500 units a month bracket. The Congress-NCP (Nationalist Congress Party) government during 2010-11 had initiated it but had to face regulatory hurdle.

Maharashtra energy minister Chandrashekhar Bawankule last week held a preliminary meeting with power distribution companies and asked them to come up with a proposal. There would be a meeting with chief minister Devendra Fadnavis as well to work out a plan of implementation as the government will have to sort out major issues with regard to budgetary allocation towards subsidy to distribution companies.

Currently, Tata Power and Reliance Infrastructure are the two private distributors while the BrihanMumbai Municipal Corporation arm BrihanMumbai Electric Supply and Transport (BEST) supplies in south Mumbai. State-run MahaVitaran distributes in eastern suburbs. The tariff ranges between Rs 2.05 per unit and Rs 9.95 per unit.

Supporting the plan, a Tata Power spokesperson said, "We believe that the consumer should have the option to choose her supplier based on the service rather than mere tariffs.”

However, Reliance Infrastructure preferred not to comment.

Kameswara Rao, PwC Partner (energy, utilities and mining) said, ''the financial requirement for uniform tariff should not be met by burdening industrial and commercial consumers as that could lead to an exodus, with consequent loss of taxes and employment from the city. The government should take a stand to follow the national Tariff Policy, which caps the cross-subsidy burden on industrial consumers, and propose use of targeted direct subsidy transfer for lifeline consumers.'' Given the higher cost of living, a higher threshold for lifeline consumption could be set, he added.

However, Debasish Mishra, Deloitte Touche Tohmatsu India Partner (consulting), said when there were efforts towards separating carrier and content in electricity distribution and bringing in efficiency through competition, uniform retail tariff made little sense.

A government official recalled that a similar proposal was discussed during the Congress-NCP government but did not find favour with the Maharashtra Electricity Regulatory Commission (MERC).

The Congress-NCP government had expressed its inability to provide about Rs 2,000 crore as subsidy to private generators and distributors, especially Tata Power and Reliance Infrastructure.

MERC in its June 2008 order ruled that it was not feasible to have uniform tariffs across different licensees due to inherent differences, such as revenue requirement, consumer mix, consumption mix, and low tension: high tension ratio. Further, MERC in a letter to the state government on July 11, 2011, said, ''The commission is of the view that the government support in the form of subsidy under Section 65 of the Electricity Act, 2003, is the only method to implement uniform tariff in Mumbai.''