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Home News Power Sector News MSEDCL's cross subsidy proposal rejected by MERC

MSEDCL's cross subsidy proposal rejected by MERC

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MSEDCLIndustry and agriculture are equally important for the nation. However, when it comes to electricity, industry pays at a higher rate and gets by and large adequate power, whereas farmers pay at a subsidised rate and suffer long hours of load-shedding.  State-run distribution company MSEDCL had tried to recover the cost of additional power purchased in 2008-09 based on this principle but Maharashtra Electricity Regulatory Commission (MERC) has turned down its plea.

MSEDCL had purchased a large quantum of power at very high cost in past few months to reduce power shortage. The cost of this power will be recovered from consumers as has been done in the past. However, this time, MSEDCL wanted to recover the cost in proportion to the base tariff. This means that farmers and poor would have paid less for costly power while the rich and industrialists would have paid more. However, MERC has rejected outright this socialist philosophy, claiming that it was against MERC's regulations.

Industries too had strongly opposed MSEDCL's proposed relief to poor and farmers. N Ponrathnam, arguing on behalf of industries, stated that Electricity Act did not permit the Commission to discriminate between consumers. If MSEDCL wanted poor consumers to be subsidised, then it should ask the state government to pay for the same.

Ponrathnam pointed out that as per Electricity Act, the cross subsidy should be not be more than 20% by 2010-11. However, in case of Maharashtra, it is still far higher than this limit.

In the order, MERC blasted MSEDCL for seeking relief for some categories at the cost of others. The Commission stated that in the basic tariff, poor and agricultural consumers are already subsidised at the cost of industry and high-end consumers. Moreover, the tariff for farmers and below poverty line (BPL) consumers has not been increased in the last two years, whereas it has been hiked significantly for other categories. If the cost of additional power was also recovered from consumers, it would result in increase of cross subsidy, which was against the principles of Electricity Act.

The Commission pointed out that the erstwhile MSEB did not recover variation in fuel cost from farmers. However, MERC put an end to this practice. MERC's rejection of MSEDCL's petition will certainly provide ammunition to the opposition before the coming assembly election. When the power bills of poor and farmers increase substantially, it is bound to create problems for the ruling parties.

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