What’s the mark-up the average consumer pays to electricity distribution companies over their cost price? This number varies wildly across states from 6.34% in Gujarat to 134% in Sikkim, according to data released by Minister of State (independent charge) for Power, Coal, New & Renewable Energy and Mines Piyush Goyal in the Lok Sabha on Thursday. For 2014-15, the purchase cost of electricity for Maharashtra State Electricity Distribution Co Ltd was Rs 4.36 per unit while the average price paid by consumers in the state was Rs 5.15 per unit, translating into a mark-up of 18.12%.
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Eleven out of the 54 state electricity distribution companies in India charged a mark-up over 50% that year, the data shows. According to the minister’s reply, the gap between the cost price and selling price of electricity owes its existence to transmission charges, transmission losses, distribution network charges, distribution losses and commercial losses. These numbers vary between states and explain the huge differences in mark-up. For instance, in states where there are huge distribution losses, the average consumer will have to share part of this burden.
Sometimes, the gap is also small owing to the fact that state electricity distributors don’t apply for adequate tariff revisions because of political compulsions. Thus, the mark-up is artificially suppressed leading to the state distribution company bearing more losses. This is the reason why India doesn’t have 24×7 uninterrupted power supply across the country and the government has to come up with schemes such as UDAY (Ujjwal Discom Assurance Yojana), a financial turnaround and revival package for electricity distribution companies.