The Hindu Editorial Analysis- 8th September, 2022 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

The Hits and Misses in TANGEDCO’s Tarif Petition 

Why in News?

The Tangedco filed a general retail power tariff revision petition proposing to hike power tariffs by 10% to 35%.

What is the proposal about?

• The proposal- The Tamil Nadu Generation and Distribution Corporation (Tangedco) has submitted a proposed revision of electricity tariff to the Tamil Nadu Electricity Regulatory Commission (TNERC).
• If the proposal comes into effect, the hike will be after a gap of eight years.
• In the proposed tariff revision, 42% of domestic consumers, would not have any increase in their charges, and the 100 units of free electricity scheme would be continued.
• However, a provision to voluntarily surrender the free units would be introduced.
• Electricity charges would be increased for those domestic consumers using more than 100 units.
• The Electricity Department has proposed to increase the electricity charges for commercial and other categories of consumers with low tension commercial connections.
• It has also proposed to charge a separate amount for those consumers having more than one electricity connection, and a separate tariff to be fixed for common lights, lift and water distribution in multistorey apartments.

Reasons behind the tariff revision demand

• Mounting losses
• Outstanding loans
• The consequent increase in interest burden
• Case in point: Even after joining the Ujwal DISCOM Assurance Yojana (UDAY) — a scheme meant for improving the health of state-owned electricity distribution companies (DISCOM)—in January 2017, Tamil Nadu could not bring down the gap between the Average Cost of Supply (ACS) and the Average Revenue Realised (ARR) to nil.

What is happening with the DISCOMs across the country?

• According to Niti Aayog’s report of August 2021, most power DISCOMs incur losses every year — the total loss was estimated to be ₹90,000 crore in the financial year 2021.
• Due to these accumulated losses, DISCOMs were unable to pay for generators on time — as of March 2021, an amount of ₹67,917 crore was overdue.
• To help these DISCOMs, the Centre in May 2020, announced a Liquidity Infusion Scheme (Aatmanirbhar Bharat Abhiyan), under which loans of ₹1,35,497 crore have been sanctioned. As of December 31, 2021, a total of ₹1.03 lakh crore has been disbursed.

Where do other States stand on power tariffs?

• Andhra Pradesh- The power tariff hike for domestic consumers approved in March, took place after a gap of two decades.
• Kerala- The increase came into effect in late June after three years.
• Bihar- In 2022, the Bihar Electricity Regulatory Commission issued an order, rejecting the proposal for a 9.9% hike.
• Punjab- No changes in the tariff were made and on the contrary, domestic consumers in the State have been given free electricity up to 300 units each month.
• Gujarat- The Aam Aadmi Party (AAP) has promised free electricity if it is voted to power in the Assembly election to be held later this year.

Do States provide subsidies to sectors like agriculture?

• Tamil Nadu- Tamil Nadu, which has been implementing free power supply for the sector since the mid-1980s, had long resisted the installation of meters even for fresh connections.
• But it has been allowing the installation of meters for agricultural pump sets.
• Gujarat- Gujarat is cited as a success story as far as segregation of feeders to arrive at the accurate consumption of the farm sector is concerned.
• Manipur- In Manipur, prepaid metering was supplemented with improved power supply, resulting in improved billing and collection efficiency as well as lower commercial losses.
• Madhya Pradesh- The Madhya Pradesh Electricity Regulatory Commission stipulated that an incentive equal to 5% of energy charges should be given on installation
• It has also pushed for the use of energy saving devices such as ISI energy efficient motors for pump sets and programmable on-off/ dimmer switch with automation for street lights.

Dues are of three types.

• Improper Tariff fixation by regulators: Regulators themselves have failed to fix cost-reflective tariffs thus creating Regulatory Assets, which are to be recovered through future tariff hikes.
• Pending Subsidies: Second, about a seventh of DisCom cost structures is meant to be covered through explicit subsidies by State governments. Cumulative unpaid subsidies, with modest carrying costs, make DisComs poorer by over ₹70,000 crore just over the last 10 years.
• Consumer Bills pending: Third, consumers owed DisComs over ₹1.8 lakh crore in FY 2018-19, booked as trade receivables.

Way Ahead

• More Stimulus: There is a need a much larger liquidity infusion so that the entire electricity chain will not collapse
• Working on AT&C losses is important, but will not be sufficient. We need a complete overhaul of the regulation of electricity companies and their deliverables.
• Rationalisation of subsidies whereby doling out of free electricity can be eliminated to those who do not deserve such support.
• Segregation of feeders has been suggested as an option to arrive at the accurate consumption of the farm sector so that the disproportionate quantum of consumption is not attributed to agriculturists in the absence of meters.
• Gujarat is cited as a success story in this regard.
• The Madhya Pradesh Electricity Regulatory Commission, in its tariff order of March 2022, came out with an incentive package in the area of demand side management.
• It stipulated that an incentive equal to 5% of energy charges should be given on installation and pushed for the use of energy saving devices such as ISI energy efficient motors for pump sets and programmable on-off/ dimmer switch with automation for street lights.
• Proper Regulation: Regulators must allow cost-covering tariffs.