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Experts raise doubts over viability of uniform power tariff in Mumbai

Power regulators, consumer organizations and industry experts have raised red flag over the viability of uniform tariff for low end consumers with monthly consumption up to 300 units in Mumbai. They have said it is against the competition envisaged in the Electricity Act 2003.

Besides, they also supported the observation made by the PricewaterhouseCoopers in its report submitted in July 2011 to Maharashtra Electricity Regulatory Commission (MERC) that the uniformity in tariff can be achieved if the enablers come into play or if the government supports the entire process via means of external support, if required.

They were reacting to the statement made on Tuesday by the chief minister Prithviraj Chavan and his deputy Ajit Pawar that distribution companies have been asked to prepare a road map to reduce tariff and ultimately bring in uniform level in tariff charged to consumers in Mumbai. There are four distribution utilities in Mumbai comprising Tata Power, Reliance Infrastructure, Brihanmumbai Electric Supply Transport and Maharahstra State Electricity Distribution Company.

VP Raja, former chairman, MERC told ”The entire intention of EA 2003 is to create competition in the power sector. Because of developments that have taken place in last few years at least in the Mumbai suburbs, the choice is now available for consumers to choose between Tata Power and Reliance Infrastructure as the service providers. Today by exercising the choice consumers can choose that company which gives them the cheapest power. Even though choice is not competition it is the first step for fostering competition. Under these circumstances, any step which bring in uniform tariff will be step against the principle of fostering competition.”

He however, said that Delhi story is not comparable to Mumbai. The distribution business is historically different. Shantanu Dixit, researcher, Prayas Energy Group shared Raja’s view saying that uniform tariff in Mumbai is against the basic tenants of competition in the power sector as the basic cost structure and consumer mix is different for different companies.

”Moreover, such a move will hamper competition for efficiency improvements on part of discoms. Further, any tariff cut should happen based on appropriate improvements in planning and operational efficiency and cost reduction rather than burdening the state exchequer,” he noted. According to Dr. Ashok Harne, energy expert, the uniform tariff is difficult to achieve in Mumbai due to high skew in the end users and in power purchase. There should be clarity on whom the uniform tariff will be applicable.

”There are different end users right from commercial consumers to residential consumers consuming less than 300 units. The electricity consumption does not go by the rules of economics. There are some end users whose consumption is not proportional to the rise in power tariff,” he added.

Ashok Pendse, consumer representative on MERC argued that it is difficult to achieve the price parity in low end residential consumers unless and until skewed consumer mix is changed in Mumbai.

”The money has to come from top end or the government then only it is feasible. Ultimately, the decision of tariff is with the MERC and not with the government. The government can give subsidy and then only it can talk about reduction or subsidized tariff without this action of subsidy legally government does not have a role,” he viewed.

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