Power experts oppose uniform rates in Mumbai

Uniformity in tariff can be achieved if enablers come into play or if govt favours entire process via external support

Power regulators, consumer organisations experts have raised a red flag over the viability of uniform power rates for low-end consumers with monthly consumption of up to 300 units in Mumbai. It was against the competition envisaged in the Electricity Act, 2003, they said.

They also supported the observation made by PricewaterhouseCoopers in its report in July 2011 to the Maharashtra Electricity Regulatory Commission that uniformity in rates can be achieved if the enablers come into play or if the government supports the entire process via means of external support, if required.

They were reacting to the statement made on Tuesday by Chief Minister Prithviraj Chavan and his deputy, Ajit Pawar, that distribution companies have been asked to prepare a map to reduce rates and bring down power rates charged to consumers in Mumbai.

VP Raja, former chairman, MERC told Business Standard ''The entire intention of EA 2003 is to create competition in the power sector. Because of developments that have taken place in last few years at least in the Mumbai suburbs, the choice is now available for consumers to choose between Tata Power and Reliance Infrastructure as the service providers. Today by exercising the choice consumers can choose that company which gives them the cheapest power. Even though choice is not competition it is the first step for fostering competition. Under these circumstances, any step which bring in uniform tariff will be step against the principle of fostering competition.''

He however, said that Delhi story is not comparable to Mumbai. The distribution business is historically different. Shantanu Dixit, researcher, Prayas Energy Group shared Raja's view saying that uniform tariff in Mumbai is against the basic tenants of competition in the power sector as the basic cost structure and consumer mix is different for different companies.

''Moreover, such a move will hamper competition for for efficiency improvements on part of discoms. Further, any tariff cut should happen based on appropriate improvements in planning and operational efficiency and cost reduction rather than burdening the state exchequer,'' he noted. According to Dr Ashok Harne, energy expert, the uniform tariff is difficult to achieve in Mumbai due to high skew in the end users and in power purchase. There should be clarity on whom the uniform tariff will be applicable.

''There are different end users right from commercial consumers to residential consumers consuming less than 300 units. The electricity consumption does not go by the rules of economics. There are some end users whose consumption is not proportional to the rise in power tariff,'' he added. 

Ashok Pendse, consumer representative on MERC argued that it is difficult to achieve the price parity in low end residential consumers unless and until skewed consumer mix is changed in Mumbai.

''The money has to come from top end or the government then only it is feasible. Ultimately, the decision of tariff is with the MERC and not with the government. The government can give subsidy and then only it can talk about reduction or subsidized tariff without this action of subsidy legally government does not have a role,'' he viewed.