Monday, Dec 22, 2014

Maharashtra power tariff cut may cost R7,200 crore

The move by Maharashtra, Delhi and Haryana reverses a progressive trend where all states had hiked power tariffs to compensate for higher input costs. IE The move by Maharashtra, Delhi and Haryana reverses a progressive trend where all states had hiked power tariffs to compensate for higher input costs. IE
Written by Anil Sasi | New Delhi | Posted: January 21, 2014 12:48 am

pay the same tariff as paid by them in April 2013 while agriculture consumers would pay 10 paise per unit, instead of 25 paise per unit.

The move by the three states could negate the broader progressive trend seen in the last 24 months, where almost all the states have hiked their respective power tariff rates for non domestic category ranging from around 1 per cent in Kerala to 35 per cent in Maharashtra, as well as domestic category ranging from around 3 per cent in West Bengal to 42 per cent in Tamil Nadu.

The move by Maharashtra, stoked by demands from the ruling party MPs, is even more worrying in the wake of the fact that the marginal revenue surplus of Rs 27 crore reported by the state at the beginning of this fiscal, should have been, according to the Thirteenth Finance Commission roadmap for fiscal consolidation, achieved in FY12 itself. This also comes at a time when the state has been proactive in curtailing growth in its debt-service obligations and has successfully lowered the growth in interest expenses from 11.9 per cent in FY12 to 10.5 per cent in FY13 (Budget Estimate). Also, the stock of outstanding liabilities of the state is rather high at Rs 2,46,447 crore in FY13, budgeted to further increase to Rs 2,70,551 crore in the current fiscal.

While the move leaves out Mumbai and its suburbs, the government might also consider consumers in the state capital in due course.

BACK TO POPULISM

*The move by Maharashtra, Delhi and Haryana reverses a progressive trend where all states had hiked power tariffs to compensate for higher input costs
*Maharashtra set to erode its wafer-thin revenue surplus
*This move could pave the way for a return to populism, junking the rational approach to tariffs

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