Under BJP, UP Moves To Bite Bullet On Power Tariff Hike

Under BJP, UP Moves To Bite Bullet On Power Tariff Hike

Under the BJP government, UP’s power sector is on the revival path. After dithering for years over implementation of bold measures to bridge the revenue gap and restore UP Power Corporation Ltd’s financial health, the state has decided to bite the bullet on tariff increase for non-industrial consumers.

Until now, UPPCL had been meeting revenue gaps by raising tariff on industrial consumers, which forced flight of industries from UP.

Determined to narrow the revenue gap of Rs 2.07 a unit, UPPCL has sought regulatory permission to hike the average electricity by 22.66 per cent.

In the annual tariff revision petition filed before the state electricity watchdog, the UP Power Corporation Ltd (UPPCL) has asked for tariff hike ranging from 260 per cent to 350 per cent for unmetered and metered rural and urban household customers and Rs 60 for farmers.

UPPCL has proposed to spare the industry from tariff hike but has sought a 15 per cent price increase for commercial consumers.

The average tariff hike proposed by the utility works out to 22.66 per cent.

UP had kept tariff unchanged for domestic consumers and farmers with private tube wells in 2016-17, which was an election year for the state, though electricity price was increased by 3.18 per cent for other categories of consumers.

The gap between the revenues and the cost of power supply in the state is relatively high. While the cost works out to be Rs 7.22 per unit for 2016-17, the average blended revenue is around Rs 5.15 per unit, leaving a gap of Rs 2.07 per unit.

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The revenue is Rs 2.17 a unit, Rs 0.78 a unit, Rs 3.47 a unit and Rs 6.15 a unit for a rural household, an unmetered agricultural user, an urban lifeline consumer and an urban household, respectively.

The state’s commercial losses stand at the staggering level of 30.21. Losses incurred by the states discoms in 2015-16 were Rs 7,689 crore but came down to Rs 6619 crore in 2016-17, a drop of 14%. The UP government issued bonds for Rs 49,510 crore under the UDAY scheme.

The state has thus far attempted to narrow the gap between the cost of supply and average revenue realisation by cross-subsidisation. The average revenue assessed from commercial, SMEs and heavy industries has been higher at Rs 7.64 a unit, Rs 8.44 a unit and Rs 7.49 a unit, respectively.

However, fearing that industries will move out of the state, the government has chosen to proposes steep hikes for other categories of users. The corporation has also sought a 150 per cent hike for metered rural consumers. For urban consumers, it has proposed an average hike of 12%.

This is by far the highest increase in tariff by UPPCL the operations were unbundled way back in 2000. As per rules, the tariff proposal should have been submitted by November last year. However, with elections in the offing, the exercise was postponed. The power regulator is expected to announce the new tariff within 120 days of admission of the proposal. The new government has adopted a tough stance against theft of power and all household are being connected to the feeders. Unmetered connections are being regularised and metered. At present, UP has as many as 80 lakh unmetered connections.

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