Government plans to rationalise power tariffs

New Delhi: The government plans to make electricity billing more efficient and transparent by reducing the number of categories of consumers, which should improve tariff collection and improve the health of distribution companies. The Central government and states have begun talks to rationalise various categories of consumers. Currently , states have different and complex tariff structure with various categories and sub-categories of power consumers, officials said.

A senior power ministry official said a committee constituting officials from Union power ministry , state power departments, central and state electricity regulators and Central Electricity Authority will look into simplifying categories of electricity consumers across states.

“The idea is to have similar categories and sub-categories of power consumers in all states. We are trying to minimise the tariff categories,“ he said.

Most states had agreed to the idea of having uniform tariff categories of electricity consumers at a two-day conference of Union and sta te power ministers held earlier this month in Vadodara. “Tariff rationalisation is one of the key resolutions adopted by the states at the conference,“ the official said.

The Economic Survey of 2015-16 released by the government in February had pointed out that India should simplify its power tariff structure by classifying its consumers in just 23 categories to bring transparency and efficiency in billing. “Simplification of tariffs with, perhaps no more than 2-3 tariff categories, will improve transparency and may well yield consumption and collection efficiency, along with governance benefits,“ it had said.

According to the survey, "The complexity may prevent consumers from fully responding to tariffs due to the high cost of processing the price information, a behavioural effect referred to as salience."

ET VIEW: Need Political Will in Order to Reform Sector

Reducing technical and commercial losses in power distribution is key. And which, in turn, calls for strong political will to put paid to reckless, open-ended giveaways in power. It would then be possible to do away with artificially high tariffs and in-built cross subsidies for commercial connections, in a bid to cover, albeit partly, the costs of gratis and unbilled power. It should then be possible to rationalise the tariffs nationally. There is certainly a case for subventions in power tariffs, but these need to be transparently budgeted and well-targeted.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.