Poor households in India may have to pay lower electricity tariff, while the rich could be asked to pay higher charges to help power developers generate more revenues. The move is necessary to ensure power supply to the manufacturing sector, critical to the success of the government’s Make in India initiative, the Economic Survey said.
In addition, industries can also use excess power generation capacity via open access to address supply issues.
The Open Access (OA) policy under the Electricity Act, 2003, allows consumers with electricity load above 1 megawatt (MW) to procure power directly from markets. It was observed that some states have imposed significant curbs on the policy.
This problem was meant to be addressed by the National Tariff Policy (2006), which established a methodology for determining the cross-subsidy surcharge to be levied on OA consumers, with a goal of reducing it over a period of time. “Nonetheless, cross-subsidy surcharges over the years have gone up,” it found.
The power sector hit its lowest-ever peak electricity deficit of 2.4% in 2014-15, according to the survey.
Reiterating the government’s commitment to continued power sector reforms to achieve the “One India” objective, the survey highlights the need to simplify complex tariff structures to enable consumers use electricity optimally. For example, in certain states there are separate tariffs for poultry farms, pisciculture, wetland farms (above and below a certain size), mushroom and rabbit farms, etc. By contrast, other energy products are characterised by a single price—or at most a few prices—across end users.
Though tariffs are set by the state electricity board, the survey has stressed the need to ensure that average tariffs are not set below the average cost of supplying electricity. “High industrial tariffs and variable quality of electricity adversely affects ‘Make in India’ and price and non-price barriers come in the way of single-nationwide electricity prices through open access.”
“States and their regulators will have a key role to play, with helpful facilitation from the Centre. The power sector is a perfect crucible for making effective co-operative competitive federalism experiment, that is now India.” it said.
The power sector added a capacity of 26.5 gigawatt (GW) last fiscal, much higher than the average annual addition of around 19 GW over the previous five-year period. Renewables targets have been revised from 32 GW to 175 GW by 2022.
In the latest round of auction under the National Solar Mission, tariff reached an all-time low of R4.34 /kilowatt per hour (KWh).