MahaVitaran worried at implication of rate cut

Electricity distribution firm says it will have to step up efforts to recover long pending dues

The state-run Maharashtra State Electricity Distribution Company (MahaVitaran) has warned that the 20 per cent cut in tariff across its 21.4-million-strong consumer-base would increase the culture of non-payment, especially among agriculture consumers.

“The tariff is skewed in nature. It is bound to go north. With the 20 per cent cut, agriculture consumers with metered power supply will get power at 55 paise and 85 paise, against the present rates of Rs 1.03 and Rs 1.33 a unit, based on their consumption. For un-metered supply, the tariff will now be in the range of 85-94 paise to Rs 1.19-1.29 a unit against the present tariff of Rs 1.13-1.54 and Rs 1.47-1.89. There is a strong need to increase, rather than decrease the tariff charged to agricultural consumers. In the case of industrial consumers, it will be down to Rs 7.01 from Rs 8.61 and for high tension consumers, Rs 10.45 against Rs 12.86 a unit,” a MahaVitaran official, who did not want to be identified, told Business Standard. MahaVitaran admits it would have to step up its efforts to recover arrears of Rs 8,880 crore alone from agriculture consumers. Of the 3.6 million agriculture consumers, as high as 3 million owe this much to MahaVitaran. Its total arrears stand at Rs 11,337 crore.

Besides agriculture consumers, arrears from other sectors include industrial consumers (Rs 220 crore), streetlight (Rs 630 crore), water supply (Rs 680 crore), residential (Rs 432 crore), commercial (Rs 85 crore) and industrial (Rs 220 crore).

As far as residential consumers are concerned, the per unit tariff would be 92 paise for consumption of 101-300 units a month, the official said.

“It is very difficult for MahaVitaran to maintain its finances, especially when it spends 80 per cent on power purchase while its tariff is impacted due to a 8-10 per cent rise in wages and 15-20 per cent hike in copper prices. On top of it, MahaVitaran's arrears have crossed Rs 10,500 crore,” the official said. He informed that MahaVitaran's agriculture recovery had reduced to Rs 410 crore (19 per cent) in 2012-13 from Rs 753 crore (57 per cent) in 2011-12. Besides, there had been tremendous pressure not to disconnect power supply to these defaulting consumers.

Pune-based non government organisation Prayas termed the government's decision as ‘unfortunate’ and said it demonstrated the failure of the regulatory process, which should have determined the tariff after due public process.

“'More important, it does not address the root cause of the problem which is extremely high average cost of supply. Dolling out subsidy without detailed public scrutiny of the need and prudence of the present costs discourages the electricity utilities to be accountable for their inefficiencies and hence does not address the basic problem. What we need today is a thorough transparent scrutiny of the utility's performance and post such public process, the government can still declare subsidy, if any. But it should be restricted only to the truly deserving consumers (say monthly units less than 100 and small and marginal farmers),” said Ashwini Chitnis, senior research associate of Prayas.