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As reported by the Express Investment Week on September 6, the power ministry plans to introduce a cess to be paid by all consumers across the country. Unfortunately, the end-use norms do not seem to have been made mandatory. With the funds raised through cess not required to be necessarily used for development or upgradation, and considering the states' financial position, there is a strong possibility that the funds could be diverted for purposes other than infrastructure development.
The cess has interesting implications. First, agricultural consumers in a few states do not pay any tariff and since the cess is on all consumers and not on consumers who are billed, will the farmers who get electricity free, be required to pay the cess? In states where farmers are charged, the jump in percentage terms will be substantial and the farm lobby will try its best to get farmers exempted. For industry, it will mean a tariff hike of at least 1.5-2 per cent without any improvement in the quality of power. Already,Indian power tariffs are the highest in the world and the quality of power is abysmal.
It appears that the cess will be included in the tariff charged by IPPs to SEBs also. What will happen to IPPs for which the PPA has been signed but supply to the grid has not yet commenced? Will the tariff be revised?. What about licensees, since they are allowed to revise the tariff only once in a year? Will the cess be treated as hike in tariff? In any case, licensees earning clear profit in excess of reasonable return will have to give a refund. So why impose the cess only to give refunds?
Instead of hiking rates, the government should recover at least the cost of power from all consumers including agriculture, and if it insists on cess, the least that can be done is to make end-use of funds mandatory for either refurbishment of plants or on the T&D network.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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