Moratorium on power charges: After Maharashtra, Uttar Pradesh to give relief to industrial consumers

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Published: April 4, 2020 1:00:36 AM

The ongoing lockdown is seen to take a toll on the finances of the state-run discoms which are finding it difficult to continue meter reading exercises and collect payments from consumers. To make matters worse for discoms, their revenues are seen to decrease on account of lower usage by high paying consumers such as the railways, industrial and commercial users.

Maharashtra power regulator has instructed its discoms to defer fixed charge payments for large consumers for three months starting March 25.

In the light of muted industrial activities amidst the ongoing lockdown to contain the coronavirus, the Uttar Pradesh and Maharashtra governments/regulators have asked their power distribution companies (discoms) to put a moratorium on payment of fixed charges to large consumers. Electricity bills have two components: fixed and variable. While the fixed or capital charges are predetermined amount that consumers pay on a monthly basis, the variable charges are based on the volume of electricity consumed.

On Thursday, Maharashtra power regulator has instructed its discoms to defer fixed charge payments for large consumers for three months starting March 25. The monthly fixed charge of industrial and commercial consumers in Maharashtra are in the range of Rs 303 –411 for every kilovolt-ampere-hour (kVAh). State-run Maharashtra state electricity distribution company (MSEDCL), the state’s main discom, earns more than `5,800 crore in a year only from fixed charges.

Following Maharashtra, Uttar Pradesh has also deferred fixed charge payments for two months. The state’s discoms earn about Rs 19,870 crore a year from its industrial and commercial consumers. On an average, fixed charges comprise about a fifth of the total revenue from these segments. While the average power tariff in the state is about Rs 7.4/unit, for these categories, tariffs are in the range of Rs 10.2-18.6/unit.

Experts have pointed out that discoms — some of them not in their best health— will have to borrow additional working capital to make up for the shortfall stemming from the lower cashflow due to the moratorium. It is not immediately clear how these discoms will tackle the challenge of the incremental working capital interest.

The ongoing lockdown is seen to take a toll on the finances of the state-run discoms which are finding it difficult to continue meter reading exercises and collect payments from consumers. To make matters worse for discoms, their revenues are seen to decrease on account of lower usage by high paying consumers such as the railways, industrial and commercial users.

Though the household sector consumes more than a third of electricity supplies, it is cross-subsidised by industrial and commercial users of electricity. Tariffs on domestic consumers is, on an average, around 40% lower than that for industrial users of power.

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