The recent massive debt recast for power discoms seems to have come as an eyeopener for state governments which long resisted timely tariff hikes in a sector where costs have soared.
In an unprecedented move, the Uttar Pradesh government has slammed its electricity regulator for deferring tariff hikes. Citing delay on the part of the regulator in announcing the new tariff structure, principal secretary, energy, Anil Kumar Gupta has written to the Uttar Pradesh Electricity Regulatory Commission (UPERC), directing it to issue the new tariff order within five days.
The move is curious as usually it is the regulator which insists on timely tariff revision to allow power companies to pass through the rise in input costs. Conventionally, governments, for political reasons, force the hand of regulators to defer the hikes, leading to accumulated losses at public sector power producers and distribution companies, necessitating special packages like the recent one. The bailout benefits have been linked to power sector reforms including timely tariff revisions.
?Under Section 108 of the Electricity Act, the UP government has directed the UPERC to issue the tariff order in five days? time as the power sector is not getting funds due to lack of the tariff order,? Gupta wrote.
The regulator issued a curt reply, stating: ?Section 108 of the said Act relates to matters of policy and is not related to determination of tariff, which is undertaken in accordance to Sections 61, 62, 63 and 64 of the Electricity Act, 2003.?
According to Gupta, the delay in tariff order is resulting in loss of revenue to the power sector. ?In UP, no tariff revision has been done for the past three years and we are in need of funds. We have proposed a hike in tariff for railways, commercial as well as industrial connections. But without the regulator issuing a tariff order, we cannot make the changes,? he said.
The issue is fast turning out to be a controversy, with department officials pointing to the appointment of UPERC chairman Rajesh Awasthi. ?He was appointed by the previous government and is known to be related to the BSP general secretary and Rajya Sabha MP Satish Mishra. That is the reason why he is going slow on the issue,? said an official of the department, requesting anonymity.
However, the UPERC has replied that the commission is a quasi-judicial body and it is already in the process of scrutinising the annual revenue requirement (ARR) and tariff petitions of all six distribution licensees and transmission licensees operating in the state. ?These petitions pertain to FY 2010-11, 2011-12 and 2012-13. The present exercise is in the final stages. Holding of public hearings is one of the steps in the process but not the final step. Several representations/comments/objections received during hearings are required to be examined meticulously as they have a direct bearing on the design of the tariff structure,? the letter states, adding the commission is fully seized of the various issues linked to the tariff order and is equally concerned regarding matters related to public interest.
The last UP power tariff revision was in 2009, after which the Mayawati government kept deferring it. However, sensing the urgency behind the hike, the Samajwadi Party government, immediately after coming to power sent a proposal to the regulator to increase power tariff for commercial and industrial users. While a hike of about 25-30% was sought for commercial and industrial users, domestic users in both urban and rural areas as well as small private power users for irrigation purposes had been exempted from the hike. The hike, which was being proposed by the state government after a gap of three years aimed to close the gap in the department?s mounting losses of up to Rs 25,000 crore.
Uttar Pradesh Rajya Vidyut Upbhogta Parishad president and member of World Energy Council, Awadhesh Verma told FE that the government?s move was extra-constitutional and in violation of the Electricity Act. ?The move to pile pressure on a quasi-judicial body by the government is politically motivated and an act of mudslinging. If the government is not happy with the UPERC chairman?s ways, it can seek his dismissal through the courts of law instead of stooping to the level of hurling accusations,? he said.