Power tariff heads north: 21% hike from September

The new tariff order will also bring into effect a quarterly system of fuel price adjustment,where power rates may change every three months,based on fluctuations in fuel prices.

Speaking on the order,DERC chairman P D Sudhakar explained that the hike was necessitated by the fact that tariffs have seen only a marginal increase over the past seven years.

“Over the last seven years,the overall increase has only been for about 7-8 per cent. The power sector is not insulated from the overall price inflation in the country. Though people would like prices to stay the same,we have to take into account the purchasing cost,increase in fuel prices and salaries of employees who work for power companies,” he said.

On the implementation of fuel price adjustment,Sudhakar said the move would ultimately benefit consumers. “Distribution companies have to take bank loans in order to make up for hikes in fuel price,and the burden for this ultimately falls on the consumer. It is better,therefore,if this increase is accounted for the quarterly period rather than annual,as the burden of interest on the consumer will be less,” he explained.

DERC member J P Singh said the fuel price surcharge may also go down in some quarters,once cheaper power is provided by new plants coming up in Bawana and Dadri.

The new order represents a significant departure from the one nearly passed in 2010-11,which proposed a decrease in tariff of 25 per cent,based on calculations that a surplus of Rs 3,577 crore would be made available to private distributors. That order was subsequently stayed by the Delhi High Court,and the DERC has now concluded that those figures were unrealistic.

“The estimation,at the time,was made on the basis of 10 power stations being set up. They were supposed to supply a surplus over of 20,000 million units. However,those stations have been delayed. It was also assumed during the earlier market situation that the surplus power could be bought at Rs 3.25 and sold at Rs 5.75.

However,that market situation has changed with the CERC order of April 2010,which means that nobody is willing to buy at those rates,” said Shyam Wadhera,the only member of the DERC who was part of the panel in 2010.

Far from making surplus income,the new tariff order has acknowledged that the discoms have been carrying over a significant revenue gap. According to Singh,there was a revenue gap of Rs 3,299 in all the three discoms as of 2009-10 and,based on projections for this year,additional losses of Rs 2,770 crore would have to be covered.

He said the adjustment has been done in a conservative manner,keeping the consumers’ interests in mind.

“If we had decided to make up for the entire loss this year,there would have been a straight 80 per cent hike. But,this year,there will only be an adjustment of Rs 1,200 crore. The rest will be gradually met over a period of four to five years. This is also taking into account the fact that we have disallowed claims of up to Rs 4,984 crore from the discoms.”

Power rates have also been increased for the New Delhi Municipal Council (NDMC) area,which gets it cheaper than the rest of the

city. Singh said the DERC would adopt a uniform power tariff for the whole city within a year.

Areas under NDMC had not seen any increase in power rates in the last five years.