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Mumbai gets power push, can now choose between BEST and Tata Power

Friday, 9 May 2014 - 7:45am IST | Agency: dna

Supreme Court dismisses appeal to restrain Tata Power from laying network

About 10.5 lakh power consumers in the island city have now got a choice in Tata Power as a power supplier. The Supreme Court on Thursday dismissed BEST's appeal to restrain Tata Power from laying its network in the region. BEST is licensed to provide electricity in the area between Colaba in the south and Sion-Mahim in the north.

Welcoming the apex court ruling, a Tata Power statement said the verdict spelled victory for island city consumers as they can now choose their electricity service provider. "This ruling will foster competition and also pave the way for customers to avail competitive tariffs and better customer service," the company said in its statement.

It is expected that with Tata Power coming into the retail sector in island city areas, power bills of residential and commercial consumers will go down by up to 35%.

"The apex court verdict is a mixed blessing. Because, on the one hand, consumers are likely to get cheaper power and on the other, the economics of the BEST undertaking may be adversely impacted," said consumer activist Shirish Deshpande.

Trade union leader Mahendra Singh noted that BEST subsidises its transport operations with profit generated from its power wing. "If it starts losing out in the power segment, then certainly its transport section will be severely affected. This has larger implications for the city transport since BEST operates its services to the entire metropolis," he added.

"Electricity for the Island city consumers will become cheaper by 35%," said Rakshpal Abrol, consumer representative with the MERC. This, he said, will be due to the lower tariff, transport losses, and the fuel adjustment charges that will go away with Tata coming into picture.

At present, BEST buys power from Tata. Of its own, there is no generation of power. So, with the change in service provider, the first benefit will a reduced tariff. After that, it will be the charge that BEST imposes on its electricity consumers to offset its transport arm losses, and the fuel adjustment charge which will go altogether.

The apex court decision can sound death knell of sorts for the BEST because its transport arm is running into losses. As per recent updates, the transport arm of the BEST has an estimated Rs748.13 crore losses for 2013-14 and Rs775.98 crore for 2014-15.

"Once Tata is in the picture in the Island city, there will be demand for uniform tariff in cities like Delhi," added Abrol. As of now, BEST, Tata Power and Reliance have different tariff rates. When contacted, BEST spokesperson AS Tamboli said, "The appeal has been set aside by the Supreme Court. I cannot comment on this immediately."

However, from the business point of view, this would mean duplication of network. Cost of laying transmission network could be huge, so it remains to be seen if Tata Power would really want to set up its own network or just use the existing network of BEST as it is doing in case of Reliance Infra. For customers it may not make much difference as transmission cost is anyway a pass-through cost.

In 2009, BEST had declined consumers' request to switch to Tata Power and had also denied permission to supply electricity using its network. After this rejection, consumers had approached MERC, which too allowed Tata Power to supply power in south Mumbai by laying its own electricity distribution network.

Tata Power currently provides electricity to many retail consumers in areas where Reliance Infrastructure had monopoly. However consumers are not hugely benefited as they still have to pay for Reliance Infrastructure's cable network.

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