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Monday, September 27, 2021

Explained: Why power costs vary, and uniform national rate is difficult to implement

The electricity tariff paid by consumers in each state is directly reflective of the cost of power procurement by the power distribution companies (discoms) in the state. How do states decide power tariff?

, Edited by Explained Desk | New Delhi |
Updated: July 16, 2019 8:56:30 am
power tariff, power supply, electricity, Shwait Malik, Rajya Sabha, electricity, Express Explained, Explained, Parliament, Indian Express, India News The cost of power in Punjab was forcing the poor to switch off fans even in the summer. (Reuters)

BJP MP Shwait Malik suggested in Rajya Sabha Monday that power tariffs should be uniform across the country so that affordable power is available to all. Malik, who represents Punjab in the Upper House, complained that consumers in his state-paid Rs 8 per unit of electricity, much more than consumers in neighbouring Himachal Pradesh and Jammu and Kashmir. The cost of power in Punjab was forcing the poor to switch off fans even in the summer, and was chasing industrial units out of the state, he said.

How do states decide power tariffs?

The electricity tariff paid by consumers in each state is directly reflective of the cost of power procurement by the power distribution companies (discoms) in the state. There are state-specific factors for this. So, states such as Jharkhand or Odisha or Chhattisgarh, which have had coal-fired thermal capacity, would typically have lower tariffs because of the base-load capacities that they possess.

Or, states such as Himachal or Uttarakhand would have low tariffs because of hydropower capacities that are either fully or partially depreciated, and from which the home state, under the Ministry of Power’s Tariff Policy, gets access to 40 per cent of the power free of cost.

On the other hand, a state like Gujarat, which has capacities based on imported coal, will have comparatively higher tariffs. States such as Delhi or Punjab, which buy power from outside to meet domestic requirements either through long-term power purchase agreements (PPAs) or spot power purchases at the power exchanges (PXs), have higher tariffs, as their power mix has high-cost power.

So is the idea of having a flat countrywide rate feasible?

The State Electricity Regulatory Commissions (SERCs) decide on the power tariff after utilities file their cost of power with the regulators. Because power tariffs entail a number of state-specific factors, as explained above, a uniform nationwide tariff is a proposition that would be difficult to implement. Rajya Sabha Chairman M Venkaiah Naidu told the House that electricity was a state subject, and there has to be some consensus for uniform power tariffs, PTI reported.

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