DVC’s power tariff hike gives ground to West Bengal discom to offer cheaper power | The Financial Express

DVC’s power tariff hike gives ground to West Bengal discom to offer cheaper power

DVC said it had to pass on the increased cost of production since it had to import high priced coal for the Centre’s 10% blending norms.

DVC’s power tariff hike gives ground to West Bengal discom to offer cheaper power
DVC announced its tariff for FY18 on 5th May this year and FY19 & FY20 on 17th June this year. (IE)

West Bengal State Electricity Distribution Company (WBSEDCL) is trying to poach on a chunk of DVC consumers and bring them to its folds following DVC’s sudden hike in industrial tariff in West Bengal. Although the tariff for industries in Jharkhand remains at Rs 4.25 per unit, the tariff in West Bengal has been brought to Rs 6.50 over a period of 6 months this year.

The Railways, steel plants of SAIL, numerous steel rolling mills and other small and large industrial consumers of Durgapur-Maithan-Asansol-Mejia-Barjora and Sarbari regions have been drawing power from DVC at Rs 4.70 per unit up to March but from April onwards, per unit power price have started moving up.

Also read: Sky-high valuations of unicorns likely to start heading south

According to Vivek Adukia, chairman of the Steel Rolling Mill Association (SRMA), under which there are 110 large and small ferro alloy and steel units having contract demand of 1,000 MVA, the billing for April-May was made at Rs 5.30 per unit but the July-August billing was made at Rs 6.5 per unit. August-September billing was made at Rs 6.50 per unit and all this has been done on the strength of the tariff recommended by the West Bengal State Electricity Regulatory Commission (WBERC). But here WBSEDCL came into play and has put power for industries on offer at Rs 6 per unit bringing it down from Rs 6.91 per unit.

The said area is the only region in India where DVC, WBSEDCL, Durgapur Power and India Power have its own distribution network and even without open access in place there are opportunities of drawing power from a distributor of choice. But DVC has been enjoying a monopoly of supplying power to the industries of the region for its low tariff, which has now been challenged.

West Bengal power minister, Aroop Biswas, told Fe that so far there has been eight applications choosing to shift to WBSEDCL from DVC and five out the eight have already been given connections. A WBSEDCL official said this initiative has been taken with a view to increase the state discom’s industrial consumer base. But most industrial consumers, especially the steel sector consumers, are of the view that WBSEDCL will not be able to provide quality power consistently and it lacked infrastructure to provide power at above 1,000 MVA.

Also read: Telecom Bill: I&B Ministry objects to ‘encroachment’

Moreover, there was no gurantee that WBSEDCL will not hike the tariff after providing the connection, which required fresh deposits. “We want the government to make a commitment in terms of retaining the offered tariff and supplying quality power,” Lalit Beriwala, director, Shyam Steel, said at an MCCI session. But according to state industry minister, Sashi Panja, the industry must be willing to compete and any protection would not be beneficial.

However, SRMA contends, DVC’s retail tariff in Jharkhand is more than Rs 2 lesser than the tariff applicable in West Bengal as on date and such huge difference in tariff has made extremely difficult for industries in West Bengal to compete with similar industries operating from Jharkhand, as final products are sold in the common market. West Bengal industries are rapidly losing business to their Jharkhand competitors, and many of them are on the brink of insolvency. The industries in West Bengal are producing and selling their material without knowing the actual cost of production. In this free market, the industry cannot realise the increased cost of power tariff, if announced retrospectively, which DVC is doing regularly.

DVC said it had to pass on the increased cost of production since it had to import high priced coal for the Centre’s 10% blending norms. In case of DVC, under Indian Electricity Act, the generation and transmission tariffs are decided by the CERC, which makes 80% of the tariff component and distribution tariff is decided by respective State Commissions namely WBERC and Jharkhand Electricity Regulatory (JERC), making 20% of the tariff component.

“It cannot be only WBERC’s prerogative not JERC’s to allow DVC to pass on the increased cost of generation,” Adukia said adding DVC had failed to submit tariff application as per timeline given under the Indian Electricity Act and both CERC and WBERC failed to announce tariff as per timeline given under the Act.

DVC announced its tariff for FY18 on 5th May this year and FY19 & FY20 on 17th June this year. A WBERC official said, DVC did not submit requisite information to WBERC in a timely manner, whereas it submitted information to JERC in a timely manner and therefore the suden hike within a limited span of time in West Bengal. But according to SRMA, many industries in the state have started reducing their production level and submitted letters to DVC to reduce their contract demand in the range of 30% to 40%. Iron & Steel Industries are Power Intensive industry. More than 30% of the material cost is power in Ferro Alloys and 15% in steel. The industries hurt with power tariff may affect employment of more than 50,000 workforce in the state.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.