Mumbai unlikely to get 20% cut in power tariff but subsidy for Maharashtra on

Sunday, 23 February 2014 - 8:15am IST | Agency: DNA

While the state government has decided to subsidise a 20% cut in power tariffs for consumers in Maharashtra, electricity users in Mumbai are unlikely to get such relief.

Senior state government officials admitted that the various paradigms and legal boundaries in which the power sector in Mumbai operated made it difficult for the state to go in for a similar tariff reduction in India's commercial capital.

The presence of multiple discoms has made the implementation of a uniform power tariff a difficult task. While the Brihanmumbai Electric Supply and Transport (BEST) supplies power from Colaba to Mahim and Sion in the island city, Reliance Infrastructure (RInfra) caters to suburban Mumbai and Mira-Bhayender. The Tata Power Company (TPC) supplies power to bulk and some retail consumers. Meanwhile, the Maharashtra State Electricity Distribution Company Limited (MahaVitaran) supplies electricity to consumers in parts of the eastern suburbs like Mulund and Bhandup.

The decision of the erstwhile Arvind Kejriwal government in Delhi to cut tariffs by 50% for households consuming up to 400 units every month and the Maharashtra government's decision led to similar demands from elected representatives in Mumbai. The issue was also raised in the state cabinet.

"Apart from BEST, the other two distribution companies are private utilities. In case of MahaVitaran, the subsidy is given by the government to another government body and, hence, these funds stay within the system. Moreover, there are CAG audits and systems to verify this," said a senior state government official.

The official added that if a subsidy is given to a private company, then it is difficult to verify whether it has gone to the right person and whether it was used for the purpose it was intended. "This depends on the private utility's certification," he said. Finance department sources, too, said while it was comparatively easy for the government to subsidise another government body, subsidies to private sector firms carried several grey areas.

"The power tariffs in Mumbai are largely lower than in Maharashtra. Why should people staying in affluent localities in Mumbai get power at cheaper rates than people in Yavatmal, the most suicide-prone district in Maharashtra?" the official said.

While MahaVitaran charged domestic users consuming less than 100 units Rs4.16 per unit (cut to Rs3.36 later), variable charges for the category in Mumbai are Rs3.93, Rs2.13 and Rs3 for RInfra, TPC and BEST (including transport loss), respectively.

"This is because Maharashtra has a heavy agricultural consumer base, public water supply schemes, streetlights and power looms which get power at subsidised rates. Network costs are high in rural and forested areas," the official said.

"Above all, tariff setting is done through a judicial process and after public hearings by the regulator," he said, adding that consumers were free to challenge the orders in the Appellate Tribunal for Electricity (APTEL) and the Supreme Court. The official said reforms in the electricity sector had led to a shift in tariff fixation powers from the political executive to the regulators and turning the clock back could be harmful.

"The power sector is perhaps the only industry where audited accounts are publicly available," the official said, adding that hence, pricing was relatively transparent.

"Around 10% of the BEST's annual revenue requirement (ARR) is used to subsidise the losses of the transport division. If you are subsidising anyone, then why should anyone subsidise you?" the official questioned, adding that the BEST's subsidy extended to buses which went beyond its distribution area.

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