MSEB will buy power at Rs 3 per unit, a hefty 30.4 per cent premium over its average selling price of Rs 2.30/unit. It will need to pay DPC around Rs 1,800 crore in the first year of power purchase. Though this estimate has been made based on variations in forex and fuel cost, indications are that the rupee will depreciate further against the dollar, resulting in a higher outgo by MSEB.

The board cannot afford to pass on the hike to consumers who are already up in arms against the recent increase. It has also been barred by a high court order in implementing any change unless it passes judgement on pending petitions.

According to experts, the industry will not accept any further increase in tariff. At the same time, the decision on issue of free electricity to farmers is yet to be taken. Underthese circumstances, MSEB will have no option but to forfeit a part of its profit, they add.

One option being considered is selling excess power to states such as Tamil Nadu, Karnataka, Andhra Pradesh and Kerala. Of these, the process has already begun for Tamil Nadu and Karnataka.

According to industry sources, it will be hard for MSEB to hike charges for these states as well. "It will have a tough time demanding more especially because it cannot store power and will be compelled to sell according to the buyer's whims." MSEB suffers a shortage of 400-500mw only in peak hours.

At present, it gets Rs 2.35 per unit from states buying excess power produced during non-peak hours and Rs 2.70 per unit in peak hours. The gap will be impossible to close since consumers both inside and outside the state are likely to refuse any sharp hike in charges.

Board officals argue that there will be no additional burden. "DPC will supply only 750mw, which is a very small percentage of the state's power capacity. AsMSEB's own generation cost is barely Rs 1.20/unit, the pool cost of the state's electricity will not increase much," officials said.

They also believe that peak demand will increase if the board removes restrictions on power consumption. It also would like to correct power frequency once the mega-project starts commercial production.