Maha govt may have to mop up Rs 300 cr towards subsidy for 50% tariff cut in Mumbai

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BrihanMumbai-ElectricSupplyMumbai electricity consumers with monthly consumption up to 500 units may have to wait 50% cut in their tariff alike their counterparts in Delhi. However, preliminary estimates made internally by power distribution companies Tata Power and Reliance Infrastructure, the BrihanMumbai ElectricSupply and Transport (BEST) and the state energy department show that tariff reduction for the consumer categories of 0-100 units, 101-300 units and 301-500 unit will cost the distribution companies worth nearly Rs 300 crore.

These companies will be entitled to get the government subsidy to make up the possible loss in their revenue as per the provisions of the Electricity Act, 2003. The reduction will be possible only in variable charge component of the per unit tariff. The other option is that the regulators can take a call to approve tariff rise in other categories especially industrial and commercial to cross subsidize the lower tariff to residential consumers with monthly consumers up to 500 unit.

A senior minister, who did not want to be identified, told Business Standard ”The issue will be discussed threadbare at the cabinet before taking any formal decision on tariff cut.”

Tata Power and Reliance Infrastructure are tight lipped on the politically sensitive issue of tariff cut in Mumbai. However, officials of both the companies cite the sections 65 and 108 of the Electricity Act. As per the section 65, the state government can grant subsidy to any consumer or class of consumers in the tariff determined by the power regulator. On the other hand, under section 108 the state government has give direction to the state power regulator in the matters of policy involving public interest. BEST official argued that it will have to make up loss incurred by its transport wing with its revenues from power distribution.

However, the ruling NCP, which also holds the energy portfolio, has publicly opposed any move to provide subsidy to private distribution companies in Mumbai including Tata Power and Reliance Infrastructure.

Tata Power has a consumer base of 4,25,000 of which nearly 2,50,000 are residential consumers of which about 1,00,000 are with monthly consumption up to 500 units. As far as Reliance Infrastructure is concerned, of the total consumers of 2.8 million, 2.3 million are residential of which 1.7 million consume up to 500 units per month. In case of BEST, which is a part of the BrihanMumbai Municipal Corporation, it has a consumer base of 1 million of which 7,65,000 are residential and nearly 6,60,000 consumers have monthly consumption up to 300 units.