Cheaper power for new units irks existing players in Madhya Pradesh

The differentiation, the industry has contended, is not allowed under the provisions of Electricity Act, 2003

Preferential tariffs being offered to new business entrants to Madhya Pradesh have led to disputes between a group of industries in the state and the electricity department.

The matter, now in the Supreme Court, could become the benchmark for other states offering innovative tariff structures and more flexibility to attract consumers.

The Supreme Court is scheduled to hear an application filed by a group of industries in Madhya Pradesh, which said the state government had subsidised power for new industrial units. 

The existing units complained the state was treating them differently even when the category of consumers was the same. 

This, the industry contended, is not allowed under the Electricity Act, 2003.

“The Supreme Court will settle a crucial issue in this matter — whether state governments and electricity distribution companies can offer higher rebates to greenfield industrial units,” said Anand Verma, an advocate-on-record representing an industrial unit in this case.

The case dates back to 2016, when the Madhya Pradesh State Electricity Regulatory Commission (MPERC) approved differential tariffs for new industrial units. 

The regulator had given Rs 1 a unit (kilowatt hour), or a 20 per cent rebate (whichever was lower), on energy charges for new connections in the industrial category. 

Existing units contested this order and had moved the Appellate Tribunal of Electricity (APTEL).

“This action of the state commission is contrary to the provisions of the Electricity Act, 2003, wherein the state commission under Section 62(3) can only differentiate between consumers on limited grounds mentioned therein. The differentiation between existing industries and new industries is not a criterion under Section 62(3) of the Electricity Act,” said the petition, reviewed by Business Standard.

Following the appeal, the APTEL in 2017 had set aside the differential tariffs, saying this is a matter of providing differential incentives to existing and new users in the same category of HT (high-tension or large) consumers. Thereafter, Madhya Pradesh Power Management Company, which oversees power distribution in the state, moved the Supreme Court last month.

State government officials said the rebate to new industries was a limited scheme for five years. “This was to attract industries to the state because cheap electricity is a primary need for industrial growth. While other states are levying high charges, the state wanted to reduce electricity charges for industry. The ones contesting the case might also be getting some or the other rebate under another scheme. This is a flawed argument,” said an official.

Verma, however, said: “It can lead to the bad old days of populism, when electricity boards frequently suffered losses worth crores due to populist rebates and subsidies. The only rebate possible is through a direct subsidy, which the state government will have to pay in advance.”

• MP offered rebate of Rs 1/unit, or 20%, on energy charges for new industrial connections in FY17
• Existing industries contested it
• APTEL struck down the rebate after which MP Power Management Co moved SC
• SC's decision could clarify whether state discoms can offer higher rebates to certain sections of industries or declare it as populism