Discoms barred from levying electricity duty on those buying power from open market
The state’s all the five government-owned power distribution companies (discoms) have been restrained from realizing the electricity duty (ED) from the industries that buy power from other states through Open Access.
The ban, according to a senior energy department official, comes after some industry captains recently met chief secretary Rajendra Kumar Tiwari and urged him to issue orders preventing discoms from levying ED on open access consumers against the rules, failing which, they cautioned, many industries might shift to other states for cheaper power.
The development is being seen as a big ‘shock’ to the cash-strapped UP Power Corporation Ltd (UPPCL) that holds the five discoms since for it this will mean loss of around ₹800 crore revenue that it realises as ED from the Open Access consumers alone.
Open Access is a system that enables consumers with heavy load to buy cheap power from the open market. This allows consumers to choose from a number of competitive power suppliers anywhere in the country rather than being forced to purchase electricity from local power utility. The local utility may realize wheeling charges from such consumers for wheeling other company’s power to them.
Present rules allow any consumer having a contracted capacity of 1 MW or above, connected to an 11 kv or above to procure power under Open Access in UP.
The electricity duty is charged on consumption at the applicable rate per unit of power consumed which means higher the consumption, higher the duty. The current ED rate in the state is 7.5% and it matters more to big consumers with heavy power consumption.
Though electricity duty is levied and belongs to the state government, the same is collected by the UPPCL through monthly power bills but retains the entire amount as revenue grant by the government.
UPPCL chairman M Devraj wrote a letter to all the discoms on March 2 asking them to keep in abeyance the realization of the ED from the Open Access consumers till the state government issues directions in this regard.
“Presently, there is no clarity on the levy of electricity duty on the Open Access consumers. We have sought guidelines from the energy department in this regard. In keeping with the facts brought to our notice it would be desirable to keep the recovery of electricity duty liability from the Open Access consumers suspended till the UP government gives directions in this regard,” Devraj said in his letter.
The development came after Gini Filaments Ltd chairman and managing director Shishir Jaipuria met chief secretary Rajendra Kumar Tiwari handing over a representation to him on the behalf of all industries here on February 12.
In his representation he complained that discoms were recovering ED even from those industries that bought power from other states through the Open Access.
Quoting the UPERC’s December 10, 2019 regulations, he pointed out that the regulations only talked of levy of Open Access charged and nowhere did they mention levy of electricity duty.
“In any case, electricity duty cannot be levied on inter-state purchase of power and also the same cannot be levied on consumers as the duty is levied on the licencee,” Jaipuria argued.
Demanding that the levy of ED on purchase of power under Open Access be withdrawn immediately to mitigate heavy financial burden on industries badly hit by the unprecedented Covid-19 pandemic, he cautioned that not doing so might force many industries to migrate to neighbouring states in search of cheaper power.
Earlier, Amit Gupta of the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ranjeet Mehta of the PHD Chamber of Commerce and Industry also made the same demand through separate representations to the CS and then additional chief secretary, energy, Arvind Kumar.
Another energy department official aware of the issue said industries’ demand for abolition of levy of ED on inter-state sale of power was legally justified. “The UPPL may try to get the rules changed to get the legal right to levy the ED on Open Access consumers but it is unlikely to succeed,” he said.