No ‘current account’ deficit

This summer will be different from the last few for Mumbai’s 39 lakh power consumers. The city will face no power cuts — even though daily peak-hour demand is almost at 3,000 megawatts (MW) — but electricity will cost more, especially in the suburbs where it is more expensive and demand is high.

This summer will be different from the last few for Mumbai’s 39 lakh power consumers. The city will face no power cuts — even though daily peak-hour demand is almost at 3,000 megawatts (MW) — but electricity will cost more, especially in the suburbs where it is more expensive and demand is high.

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Over the past five summers, Mumbai faced an acute shortage of power — never less than 500 MW — which the utilities made up for by buying power from outside.

This time too, the suburbs will face a shortfall but they needn’t worry because their distributor, Reliance Infrastructure (RInfra), has lined up sources for additional supply albeit at costs higher than the other three power suppliers in Mumbai. The rates, however, are lower than last year’s procurement.

Power rates have always been a problem in the suburbs, which pay at least 30% more than consumers of Tata Power Company, which mainly supplies to South Mumbai, major consumers such as the railways and recently to the suburbs as well. The huge difference in the rates made over one lakh RInfra consumers switch to Tata.

The migration is expected to gain pace because state energy minister Ajit Pawar has ruled out a uniform power tariff in Mumbai.

Pawar’s announcement was expected because the uniform tariff model in New Delhi failed despite government subsidies and equitable distribution of power in times of shortage. Utilities there demanded a hike of 60% last week, saying their cash reserves are enough to run operations only till May 31. They claimed that their losses have created a revenue shortfall of Rs 9,000 crore, making them unviable. The power purchase cost has escalated 196% in eight years.

Consumer representative Sandeep Ohri said the problems in Mumbai’s suburbs would get worse primarily because the state regulator has failed to force RInfra or any other utility to make prudent purchases on a long-term basis. “The suburbs will continue to suffer till RInfra puts in place alliances for long-term affordable power. The company buys power on a short-term basis and adds to consumers’ costs. The regulator must take penal action against such defaults,” Ohri said.

He pointed out that suburban consumers would have to pay Rs 2,700 crore as regulatory asset costs to RInfra at some stage. “The company will recover the amount with interest and that will impact monthly bills more than you can imagine,” Ohri said.

“This year’s situation is different because power is available across the country. Generation capacity has increased over the past year,” said Tata Power Executive Director S Padmanabhan.

Compared to last year’s corresponding period, the Tatas will have 400 MW more, which they are utilising for their own consumers. They had to buy power from outside despite having sufficient generation capacity because it was asked to give power to RInfra. Since Tata’s arrangement with RInfra is now over, the company finds itself in a comfortable situation.

RInfra, however, is expected to spend more on buying 260 MW from Wardha Power Company because of an interim directive from the regulator. The burden will be passed on to its consumers, who are already paying the highest rates in the city.