The ministry of power’s new tariff policy would for the first time incorporate clauses that promotes energy conservation and sustainable use of ground water. In addition to this, the long-awaited tariff policy also requires the state electricity regulatory commissions to lay out a roadmap that rationalises retail tariffs within a narrow 20 per cent range of the average cost of supply by the turn of this decade. At present, industrial tariffs are way above the average cost while that of the farm sector are well below the costs. The new policy, which was recently sent for comments to various incumbents including state governments and regulatory commissions, has recognised that appropriate pricing of power to the farm sector can be one of the tools for energy conservation and sustainable use of ground water resources. It outlines that tariff for the farm sector may be set at different levels for different parts of a state depending on the condition of ground water table to prevent depletion of ground water. To date, power pricing both at the retail and generation end, followed concepts that kept the viability of utilities in mind. This new orientation to the tariff policy is important as case studies in states like Maharashtra have indicated a rapid decline in ground water resources after the state government announced the free power scheme. The new policy does point out that the present Electricity Act has the necessary provisions for tariff differentiation based on geographical location.
