Power sector reform in the states has come a long way, with the unbundling of electricity boards, the setting up of regulatory commissions and issue of tariff orders. But despite almost a decade of reform, cross-subsidisation continues with industry and commercial establishments continuing to pay excessively high charges to help defray the cost of supplying cheap power for domestic and agricultural use.
Figures for the country as a whole show that electricity prices were the highest for commercial users, with an average rate as high as Rs 4.90 a kwh, followed by industrial consumers at Rs 3.98 a unit. In sharp contrast, the average unit rate for agriculture was Rs 1.15 (less than one-fourth that of commercial users) and Rs 3.01 for domestic consumers (less than two-thirds that of commercial users).
The average paid by consumers in different sectors, however, camouflages the extent of disparities in power pricing across the country. For instance, agriculture?it accounts for about a quarter of the total consumption and is one of the most politically sensitive areas?continues to enjoy a flat rate, with charges fixed on the basis of the horsepower of pumps used for irrigation.
Despite the variation in prices based on pump size, the average agriculture tariff in the country as a whole was almost uniform, with rates in the Rs 1.12-Rs 1.16 range. And the flat charges ensure that the marginal cost of using electricity was zero in many states, leading to inefficient use of resources by causing excessive depletion of ground water.
Some numbers show that such pricing has pushed up the share of power consumed by agriculture to between a third and half total consumption in states like Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Karnataka and Haryana.
Inter-state disparities in power charges are the highest in agriculture. While some states like Punjab and Tamil Nadu provide free power to agriculture, charges are only minimal in Pondicherry (Re 0.14), Andhra Pradesh (Re 0.25) and Jharkhand (Re 0.29). However, states like Assam, Himachal Pradesh and Madhya Pradesh have raised charges for agricultural consumers to more than Rs 2 a unit, indicating the potential for reducing subsidies.
There were also significant disparities in power charges paid by domestic consumers, both across and within states. National averages show that the Rs 3.71 paid by users consuming around 1,000 kwh a month was around three-fourths more than the Rs 2.14 paid by domestic users consuming 100 kwh a month. Curiously, while most states charged higher rates for higher use, Uttar Pradesh and Uttarakhand charge uniform rates, while Rajasthan even provided lower rates for large consumers.
Average power charges for domestic consumers were lowest in Goa (Rs 1.70 a unit) and Jammu & Kashmir (Rs 1.78). This is less than half the average paid by domestic consumers in states like Andhra Pradesh (Rs 3.76) and Assam (Rs 3.89). In fact, urban consumers in states like Gujarat (Rs 4.46), Madhya Pradesh (Rs 4.18) and Maharashtra (Rs 4.18) paid the highest price for domestic power.
Though power prices paid by industry were higher than that of domestic consumers, the disparity in rates across the different sub-segments was minimal.
The average rate of Rs 3.69 paid by small industry was only 6% more than the Rs 3.93 paid by heavy industry units consuming 87.60 lakh units a month. Bulk consumers paid much less than other users among large users in industry, with the average prices coming down from Rs 4.25 a unit for medium industry to Rs 3.93 for high-end users in heavy industry.
Worst off were consumers who used power for commercial purposes. Not only were the prices paid by them the highest, but there was also sizable disparity in rates, with charges differing by as much as 16% at the national level and varying from Rs 4.43 a unit paid by those consuming 1,500 kwh a month to Rs 5.14 paid by consumers of 7,500 kwh. States charging the highest prices for commercial establishments included Kerala (Rs 8.88), Karnataka (Rs 6.49), and Andhra Pradesh (Rs 6.21). The rates were less than half these in states like Uttarakhand.
