Power tariffs in India are one of the lowest in the world: RK Singh

India has one of the lowest power tariffs in the world.

Despite countries, especially Europe, witnessing a steep increase in electricity prices due to the Russia-Ukraine war, India managed to offer stable power tariffs to its consumers, Union minister for power and renewable energy RK Singh told Moneycontrol in an interview.

“Recently, the minister from Spain was here. Now power tariff in Spain is €50 per megawatt hour (MWh), that is almost  Rs50 per unit! The entire developed world went through the crisis of very high power cost, which led to hefty hikes in power tariffs. But, we didn't let the global increase in input costs affect us at all. The power cost of our consumers remained levelised. So, our prices will remain stable, the tariffs will remain stable and the supplies will also be available to meet the growing demand,” he said.

The primary cause of high electricity prices is high fuel (input) costs. When power tariffs increase, governments can ensure affordability by regulating the prices, reducing taxes and introducing subsidies among a host of other interventions.

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According to a report by Statista.com, a leading provider of market and consumer data, published on March 3, Denmark and Germany have the highest household electricity prices worldwide. As of June 2022, Danish households were charged around $ 0.53 (Rs 43.4) per kilowatt-hour (KWh), while in Germany the price stood at $0.52/KWh (Rs 42.5 per unit). India’s domestic power tariffs are one of the lowest at $ 0.07 (Rs 5.7), while the UK charges $ 0.47 (Rs 38.49) and the US charges $ 0.18 (Rs 14.74). Crude oil and natural gas-producing giants like Iran, Qatar, Russia, and Saudi Arabia have some of the cheapest electricity prices in the world as the average household pays less than $0.1 per unit (Rs 8).

The minister said that for the first time, all states and union territories, barring two, have made annual revisions in power tariffs or have started the process. Electricity in India is a concurrent subject under the Constitution.

“I was so happy to note that the tariff has been updated in every state this time, barring two. And these two states will also update their tariffs in just about 15 to 20 days. Every state has different tariffs. Every state has a regulator which fixes the tariff. The point is that this exercise happened dot on time this year. It's just the beginning of the financial year and the power tariffs for 2023-24 are in place in all states and UTs. So, the situation is improving with each passing year,” Singh said.

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As far as tariff increase is concerned, he said any hike will depend on coal price, railway freight charges. “Power tariffs increase when coal prices go up or railway freight increases. So, those aspects are outside our control. The distribution costs are mainly the salary costs of the distribution companies. So, when the salaries go up, that has a certain impact on the tariffs too,” he said.

The minister added that subsidy payments by the state government to the discoms have also started to happen on time. “Can you imagine payment of current subsidy dues is up to date? Only the legacy dues are being paid. This is definitely a first. In fact, now even the accounting of the subsidy bill have improved and the scope of state government’s being overcharged by discoms has been eliminated,” Singh said.

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Power subsidies are now being offered by at least 27 states and union territories in the country.