Maharashtra offers 7272 crore annual subsidy to reduce power tariff by 20%

Tuesday, 21 January 2014 07:08 Lathish PV

MaharashtraTaking a cue from the Aam Aadmi Party (AAP) government in Delhi, the Congress-led Maharashtra government on 20-01-2014 slashed power tariff by an average 20 per cent for all classes of consumers. In fact, for the already subsidised agriculture sector, the government cut rates by nearly 50 per cent. The decision means the government will have to bear an additional burden of Rs 606 crore monthly and Rs.7272 crore annualy. An additional monthly burden of Rs 100 crore would have to be borne by the state's power generating and transmission arms. The state's energy department has warned that the move would have an adverse impact on the sector.


The reduction is for all consumers — residential, commercial, industrial and agricultural — supplied by Maharashtra State Electricity Distribution Company Limited (MSEDCL), including those in Mulund, Kanjurmarg and Bhandup. It is not applicable in the rest of Mumbai since the remaining areas are supplied by BEST, Tata Power and RInfra. In the residential category, the benefit will be only for those who consume up to 300 units a month. The cuts will be across consumption slabs in the other categories.

The lower rates will benefit consumers across Maharashtra except Mumbai, where only consumers in the eastern suburbs of Powai, Kanjurmarg, Bhandup, Vikhroli and Saki Naka will gain for now. The rest of Mumbai won't benefit as the decision is limited to the government-run power utility MahaVitran.

While the Brihanmumbai Electric Supply and Transport (BEST) supplies power in Mumbai city, Tata Power Co Ltd and Reliance Infrastructure Ltd (R-Infra) cater to the suburban areas of Mumbai. But a tariff cut may be in the offing for these areas too.

Following demands from ministers and MPs from Mumbai, Chief Minister Prithviraj Chavan has asked the energy department to consult the Maharashtra Electricity Regulatory Commission and firm up a plan for extending the subsidy to Mumbai consumers being served by these power utilites. "The CM has asked the department to put up a proposal in this regard during the next cabinet meeting," said a senior Congress minister. For now, the move will benefit 1.97 crore consumers — 1.42 crore domestic, 4 lakh industrial, 15 lakh commercial and 36 lakh farmers. Though the concerns cited by industries was the prime reason for slashing rates, the reduction in rate is the highest in the agriculture sector.

While the AAP government in Delhi had limited its subsidy to those consuming less than 400 units electricity per month, the Maharashtra cabinet has put the cap at 300 units per month. Earlier the tariff was Rs 4.16 per unit for domestic consumers using less than 100 units of power monthly, the revised rate is Rs 3.36 per unit. Similarly, the rate for those consuming between 100-300 units per month has been reduced from Rs 7.42 per unit to Rs 6.05 per unit.

Power experts and consumer activists say the tariff cut announcement is an eyewash. "In September 2013, the government had imposed a surcharge and an additional fuel adjustment charge (FAC) on tariffs, which amounted to 20%," said an expert. "These charges are to last till February. The government's tariff cut is applicable on existing charges, not what the rates will be once the surcharge and the additional FAC are removed. So, Monday's announcement amounts to nothing."

But state power ministry sources contradicted the experts' view, saying the hike imposed in September was stayed by the appellate tribunal for electricity and, thus, never imposed. The new tariffs will be effective once the Maharashtra Electricity Regulatory Commission (MERC) approves the cabinet's decision, which is said to be a formality. The approval is expected within 10 days, which means the tariff cuts may be in place in February.

Source- Indian Express