Mumbai backsliding

Tariff cut in Maharashtra threatens to undo the state’s recent progress on power reform.

Published: January 22, 2014 1:22:13 am

Tariff cut in Maharashtra threatens to undo the state’s recent progress on power reform .

The Maharashtra government’s decision to reduce power tariffs by an average 20 per cent across the state, but for Mumbai, is clearly politically timed and misguided. Prompted presumably by a similar decision taken by the Aam Aadmi Party government in Delhi, the move threatens to set the state back by at least a couple of years on basic power reform. Besides burdening the state government with a Rs 7,200 crore subsidy, the decision not only serves as a disincentive for the electricity regulator, which has sought to rationalise tariffs over a period of time, but also threatens to wipe out the gains made by a state that has made commendable efforts in meeting its FRBM (Fiscal Responsibility and Budget Management) commitments.

By all accounts, this decision has been made for short-term political gains. The stage was set when, with Lok Sabha elections only three months away, at least two Congress members of Parliament, Sanjay Nirupam and Priya Dutt, vociferously demanded a cut in tariffs in Mumbai. Chief Minister Prithviraj Chavan promised to consider their demand. Another MP, Milind Deora, who is also a Union minister of state, demanded a “white paper” on how power subsidies are distributed. Political posturing by its own MPs in Mumbai and the Congress’s recent decision at the Centre to increase the number of subsidised LPG cylinders to 12 may have finally emboldened Chavan to hand out this largesse to the entire state.

Maharashtra’s power tariffs are undeniably high compared with many other states, but that is because the state electricity regulator has been prompt in accepting the tariff revisions sought by private distribution companies and the state-owned utility, Mahavitaran. In other words, Maharashtra is one of the few states that have raised tariffs in tandem with the increase in the cost of producing power. Chavan and his cabinet seem to have forgotten that Delhi could still afford some subsidies given its comfortable fiscal position. Maharashtra, on the other hand, cannot afford to splurge, even more so because it is only now that its finances have started looking better.

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