Maha power tariff slashed by 20%; Mumbai excluded

The new tariff structure in force will be Rs 3.66/unit for 0-100 units and Rs 6.05/unit for 100-300 units and will not exclude Mumbai and its suburbs as the state distribution company, Mahavitaran, does not supply power to the city.

Maharashtra chief minister Prithviraj Chavan told CNN IBN he would talk to Mumbai’s private distributors, Tata Power and Reliance Infra, after returning from Davos where is he attending the World Economic Forum, and a decision on Mumbai power rates will be taken post that.

The Electricity Act, 2003, vests the power to decide on tariff structures in the hands of state electricity regulator, which in Maharashtra’s case is the Maharashtra Electricity Regulatory Commission (MERC). Governments, however, are free to provide a power subsidy.

The state will bear a cost of Rs 7,200 crore towards payment of the subsidy.

The move will not impact the financial health of discoms, said Pramod Deo, former chairman of the Central Electricity Regulatory Commission. “The law is clear that if the state wants to reduce price for its consumers, it has pay the difference upfront to the discom.”

While the move in itself will be revenue-neutral for power distribution companies, it’s a negative for the power sector, said Rupesh Sankhe, Power Analyst at Karvy Stock Broking.

“The recent financial restructuring plan mandated state electricity boards (SEBs) to raise electricity tariffs and this move will impact their capex program,” he said.

“As we are getting closer to election time this is an attempt to give some relief to the potential electorates,” said Anil Razdan, former power secretary in central ministry.

“If the government really wants to give relief to people, it should expedite environmental clearances for various captive coal blocks that are lying in limbo. Cheaper and quickly-procured coal would reduce the requirement of power generation companies to import coal.”

But Jayant Deo, a former member of the MERC, pointed out that power rates in Maharashtra have been very high and called the reduction “too miniscule and very late”.

“Even after a 20 percent reduction, compared to Delhi, Maharashtra domestic consumers will be still paying 2.5-3 times,” he said, adding that one of the key reasons behind the high rates was because power distributors in the state have entered into power purchase agreements with generating companies at high rates.

“The market rate of power is much lower. If Maharashtra decides to implement the Electricity Act, it has a clause that competition should be brought in into the power sector,” he said, adding that this would bring down power rates.