Not in Mumbai, but Maharashtra catches AAP virus, power rates cut 20 pct

Written by fe Bureau | Mumbai/New Delhi | Updated: Jan 21 2014, 20:16pm hrs
AAPAlthough Mumbai power rate cut is still work-in-progress, according to govt, Maharashtra did gets its sop with power rates being slashed.
Despite a budget surplus of just Rs 27 crore in FY13 and a planned surplus of Rs 184 crore in FY14, Maharashtra on Monday announced a Rs 7,200-crore annual cut in power rates, triggering chances of copycat power cuts across states.

Haryana also announced a power tariff cut for low-use consumers after Delhi did, but neither states cuts are as sweeping as Maharashtras Arvind Kejriwal's (Aam Aadmi Party) AAP govt effected Delhi power tariff cuts, for instance, will just cost Rs 60 crore over the remaining three months of this fiscal; Haryanas rate cuts add up to Rs 600 crore, suggesting each state cutting tariffs is going one better than the previous one.

The move by the three states could negate the broader progressive trend seen in the last 24 months, where almost all the states have hiked their respective power tariff rates for non-domestic category ranging from around 1% in Kerala to 35% in Maharashtra, as well as for the domestic category ranging from around 3% in West Bengal to 42% in Tamil Nadu.

Maharashtra chief minister Prithviraj Chavan, however, maintained it was not a copycat move and, in fact, the state had formed a committee on this as far back as November 19 last year. Indeed, he said, the move was necessitated by the fact that the states industrial tariffs are the highest in the country and the stress being faced by farmers. He added that his government is working on reducing tariffs in Mumbai as well; the state capital had been kept out of the purview of the cuts announced on Monday.

While the total subsidy burden will be Rs 706 crore a month, the government said Rs 606 crore will be borne by the state government while Rs 100 crore will be shouldered by the Maharashtra State Electricity Transmission Company (MahaTransCo) and Maharashtra State Power Generation Company (MahaGenCo).

The accumulated profits of both companies were Rs 2,200 crore in FY12. Mondays orders spared the Maharashtra State Electricity Distribution Company(MSEDCL) whose accumulated losses in FY12 were Rs 4,649 crore, up sharply from Rs 3,793 crore in FY11.

The decision to trim tariffs follows a recommendation by a committee led by industries minister, Narayan Rane, to cut tariff by 10-20%, citing unrest among sectors fuelled by high electricity tariffs. Residential consumers who utilise up to 100 units will get a 19.2% rate cut, while those who consume above 100 but up to 300 units will receive benefit of a 12.4% tariff reduction. Residences that consume more than 300 units of electricity will continue on existing rates, without any change in tariff. The changes in the tariff structure will be applicable from February 1.

The cabinet decision will benefit consumers in specific areas in Mumbai Powai, Kanjurmarg, Bhandup, Mulund, Saki Naki and Vikhroli where MSEB supplies power. However, it will not impact consumers who receive power from Tata Power, Reliance Infrastructure Ltd and BEST.

The move comes at a time when the state has been proactive in curtailing growth in its debt-service obligations and has successfully lowered the growth in interest expenses from 11.9% in FY12 to 10.5% in FY13 (budget estimate). Also, the stock of outstanding liabilities of the state is rather high at Rs 246,447 crore in FY13, budgeted to further increase to Rs 270,551 crore in the current fiscal.