‘Power tariff in Maharashtra will remain higher than other states’

The Maharashtra government’s decision to cut power tariffs by 20 per cent for all class of consumers has evoked a mixed response.

Mumbai | Published:January 23, 2014 1:52 am
idea-med Ajoy Mehta says the lower tariffs will continue till the state pays Rs 606 crore additional subsidy every month.

P Vaidyanathan Iyer: Politicians like Milind Deora are demanding a white paper on subsidy in power sector. How is the subsidy distributed amongst the different consumer classes?
The cost of power is Rs 3.30 per unit. But the supply cost works to Rs 6.31 per unit. If we were to supply power on a secular principle, the cost will Rs 6.31 for all sectors. However, we apply non-secular tariff to help some sectors like agriculture. The highest tariff is on hoardings (Rs 14 per unit) followed by commercial (Rs 9-10), industries (Rs 8- 9). We recover Rs 6,300 crore extra from industries, Rs 1,900 crore from commercial and Rs 1,200 crore from railways and others to enable us to cross subsidise other sectors. Agriculture sector is cross-subsidized to the tune of Rs 6,800 crore and domestic consumers who use less than 300 units to Rs 1,800 crore.

Shubhangi Khapre : Why is the tariff for industry higher in Maharashtra compared with neighbouring Chhattisgarh, Madhya Pradesh and Gujarat?
Power generation through coal in Maharashtra is as high as 85 per cent, whereas in Karnataka it is 66 per cent through coal and 20 per cent hydel. Maharashtra has just 1 per cent hydel. In Chhatisgarh, power is 93 per cent coal based, but they are sitting on mines. We have to import coal from Orissa, transport alone adding 80 paise per unit. Western Coal Limited mines are almost dying. Another factor which works is booking timing that has given Gujarat a huge advantage as it gets power at less than Rs 3.50. We tied up long term power only after 2005. I must candidly admit that power tariff in Maharashtra is bound to remain higher than other states.

Shubhangi Khapre: Is it true that Maharashtra is losing industries to Gujarat where tariffs are lower?
Just being power surplus or having lower power rates does not ensure conducive climate for industries. A lot also depends on access to power. In Maharashtra, we have released 60 lakh connections, of which 10 lakh connections have been added for the agriculture sector in the last five years. Gujarat has released only two lakh connections for agriculture. Maharashtra has a total of 37 lakh agricultural connections, Gujarat has just 10 lakh. As many as five lakh connections are in waiting since 1993. In our state, the connections waiting is just 1-1.5 lakh. The power tariff goes up as the number of agriculture connections increase as you invest Rs 70,000 to Rs one lakh for every connection and recovery
is low.

George Mathew: Following the decision to cut power tariff by 20 per cent, has the state government committed about paying the compensation up front against this additional subsidy?
Section 65 of the Electricity Act, 2003, very clearly reads that if the state government requires the grant of any subsidy to any consumer or class of consumers in the tariff determined by the state commission, it has to pay in advance for the same.
P Vaidyanathan Iyer: Can the Maharashtra Electricity Regulatory Commission disapprove of the subsidy?
MERC can disapprove to the extent of the Rs.1000 crore that has to come from the companies out of its surplus. Out of the burden of Rs.8400 crores that the state will have to bear due to the subsidy, Rs.1000 crores will have to be raised by the companies. MERC can technically say no for the utilization of this Rs.1000 crores.

Shubhangi Khapre: How long will the subsidy last? The Narayan Rane committee report says 10 months.
MSEDCL can provide power at subsidised rates till the government continues to pay us Rs 606 crore per month.

Sandeep Ashar: Should we not look at giving subsidy directly to the consumer?
For giving a direct subsidy, the government will need everyone to have an Aadhar card even as the Supreme Court has said that absence of Aadhar card cannot be a ground for denying anyone subsidy.

P Vaidyanathan Iyer: Does MSEDCL have any problem with this type of subsidy mechanism?
MSEDCL is revenue neutral. Till the government continues to give subsidy, MSEDCL has no problem. The state gives us Rs 3, 500 crore for agriculture subsidy and Rs 1,100 core for subsidy to powerlooms.

Shubhangi Khapre: There is much debate on agricultural pumps. There is allegation that you are hiding your losses in agricultre and showing that Maharashtra is a surplus power state.
The residential power consumption has gone up by 10 percent of 2011-12 to 2012-13. Commericial consumption has gone up by 11 per cent. High tension industrial consumption has gone up by 1 per cent. Agriculture has dropped by 3 per cent. If MSEDCL had been manipulating, it would have increased collections from the other three categories and not from agriculture. Agriculture is easy to manipulate because half of the connections are not metered. We have 14, 000 feeders in Maharashtra of which 7, 000 feeders for agriculture of which 5-7 per cent show negative losses. Earlier, we would declare losses on 150 divisions individually. From May, 2011, we decided to declare losses feeder-wise and loadshedding will also be carried out feeder-wise. Information on how much power has been fed in to each of these feeders and how much money has been collected is available on the internet.

Shubhangi Khapre: How long will it take to implement power meters in agriculture sector? Are there vested interests trying to block the power metering in Maharashtra?
If we decide it should not take more than three years. Well, there may be some vested interests. Frankly, speaking it wouldn’t be prudent to blame anybody. The power companies including us should have carried out metering. As an experimental basis we have taken up 1,000 feeders.

Manasi Phadke: What are the distribution losses in Maharashtra?
Distribution and Commercial losses are down to 14.6 per cent down from 35 per cent in 2005-06. Distribution losses are those lost due to theft and technical faults and commercial losses depend on how much money I collect for every Rs 100 I raise as a bill. Today, the collection is up to 98 per cent in residential, commerical and industrial categories. In agriculture, the collection is just 20-25 per cent.

Stuti Shukla: Do you think the power tariff is Mumbai is justified? What do you expect to come out of the audit of BEST, Reliance and Tata that supply power to Mumbai?
Private companies get their accounts audited through their own auditors and submit it to the regulator, which is available publicly. People can question tariffs in Mumbai when the account books are submitted to the MERC. Even after the MERC fixes the tariff, a citizen has the right to appeal against it through a judicial method right up to the Supreme Court.

Pallavi Ail: Are tariff cuts required in Mumbai?
I won’t comment on that. I will only say that Mumbai tariffs are currently lower than Maharashtra tariffs. Mumbai does not take any agriculture load. People in Mumbai are, I suppose, economically better off than those from other parts of Maharashtra.

P Vaidyanathan Iyer: There were allegations of state buying short term power from private companies in a non-transparent way.
We purchase power through three routes-long-term power purchase through open tenders, short-term power purchase through exchanges-which is as transperant as the share market- and short-term power purchase through bilateral which is also through tenders. Not a single unit of power has been purchased without tendering.

P Vaidyanathan Iyer: There were allegations that the tenders were managed.
One cannot manage the exchange since it is publicly available on an IT platform that is examined by regulators. Our long term bids are approved by the government of India and all regulators. Power exchanges cannot be non-transperant because when I put in my buy-bid and when the seller puts in a sell-bid, neither of us knows who put in how much and I do not know who my seller is. So power-exchanges cannot be managed unless someone is snooping into
the software.

Manasi Phadke: What is your opinion on the BEST undertaking cross-subsidizing its transport division through its power distribution division and levying a transport deficit recovery charge on its power consumers?
BEST transfers 10 per cent of its revenue. Rs 4,000 crore is the annual revenue requirement, of that Rs 400 crore is transferred to its transport division. It is coming from the higher users of power – people using air-conditioners and so on. If your political philosophy is that the rich man must pay for the poor then taxes, cross-subsidy
is correct.

P Vaidyanathan Iyer: How many power projects are stuck in Maharashtra because of coal and legal issues?
Power projects of 2,500 megawatts are ready. They can run on imported coal. But they are stuck fundamentally because there are no power purchase agreements. Most of these plants came up in 2005 when power was selling at Rs 8. Now suddenly power prices have crashed to Rs 3 so it has become unviable to run with imported coal. I have not issued any tender for purchasing power. My power purchase at the exchange is also very limited. Who do you sell all that power to?

Manasi Phadke: How has the state’s experience with power distribution franchises been?
It has been mixed.The distribution sector is completely licensed. So we thought that one area where privatisation can be brought in is collection of dues. We did bring it in. There is a limited success, but then again it is about people’s acceptance. People are somehow more comfortable with the government in a monopoly sector.

Sandeep Ashar: If you want to lower tariffs for private
distribution companies, what route will the government have to take?
This question has to be answered together with the MERC. Their account books are examined by the MERC, not by us. I really don’t know what their account books are all about.

Stuti Shukla: How strongly does Maharashtra need the Jaitapur power plant?
I am a big advocate of nuclear power. Safety is a question of, what is the percentage of error that can take place. Even coal plants look safe, but the kind of pollution and problems that they can create is terrible. All that you can do is make it safer, make it prudent. The Jaitapur plant that is coming up is at a height so even with the highest tsunami water cannot inundate that plant. It is being designed for an earthquake level of 9 plus.

Sandeep Ashar: Maharashtra had expected to be free of load shedding by 2012 end, but many rural belts continue to face load shedding. When will the state be free of load-shedding?
Being power surplus is not the issue. The issue is that consumers are not paying. If they start paying we can give then 24 hours power. So the only way of penalising them for not paying is to hold back power supply. These are areas where losses are more than 70 per cent. However, in May 2011 when we started, there were only about 2,000 to 2,500 feeders that were free from load shedding. Today that figure has gone up to more than 7,000 feeders.

(Transcribed by stuti shukla & manasi phadke)

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