Still a long way to go before Mumbai has uniform power tariff

With energy minister Ajit Pawar mooting the idea of uniform power rates in Mumbai once again and the Shiv Sena-Bharatiya Janata Party legislators pressing for it, the age-old proposal seems to have gained momentum. But, is it really feasible?

Let us first look at the ground realities. Power consumers in Mumbai are served by four power utilities — Tata Power (about 50,000 customers), Reliance Infra (28 lakh in Mumbai suburbs), BEST (10 lakh in the island city) and a small section of Mulund and Bhandup are served by the Maharashtra State Electricity Distribution Company Limited.

Mumbai needs 2900 MW to 3000 MW every day. Tata Power generates about 1800 MW and RInfra about 500 MW, leading to a shortfall of about 700 to 800 MW. As Mumbai consumers want power 24X7, this power is bought at a much higher rate from the open market. And this purchase is driving the rates in Mumbai skywards.

How does the rate mechanism work?
The cost of power includes power purchase cost and power distribution cost. In case of Tata Power and BEST, the power purchase cost is about Rs4 (Tata Power generates and gives it to BEST) while for Reliance, it has three variables — it generates 500 MW at about Rs2.5 per unit, buys about 200 MW at Rs4 per unit and buys 700 MW more from the open market, which can go up to Rs11 per unit. The average unit cost for RInfra, therefore, could be as high as Rs7 per unit.

Why is the RInfra rate the highest?
As explained earlier, RInfra has to pay the highest rate and therefore its tariff is the highest. Besides, it also has the largest base of subsidised consumer (residential consumers using less than 300 units per month), for whom the cross-subsidising comes from commercial and industrial consumers. While in case of Tata Power it is minimal, BEST has only about 40% to 45% such consumers. RInfra must cater to the largest — a whopping 70%.

“RInfra is also to be blamed since it never augmented its capacity beyond 500 MW despite having the opportunity after the Electricity Act, 2003. They are simply passing on the high cost to their consumers, always bemoaning that they are not being allowed expansion at their Dahanu project,” said a consumer activist who did not wish to be named.

An RInfra spokesperson rejected the claim saying their company insisted on Dahanu as that would come quickest to the rescue of Mumbaikars. “We have the land with us, we have the distribution network ready and coal linkage will not be an issue. We could add 1200 MW in just two years whereas it will be a long-drawn process elsewhere. We have seen how long it takes to erect the project elsewhere. Our Shahapur project is stuck as we don’t have the land with us till now,” he said.

So will it work if the government offered subsidies to RInfra consumers?
That is exactly what the RInfra wants. But should the government do it, other consumers and bodies may appeal in the Maharashtra Electricity Regulatory Commission, which is the quasi-judicial authority to settle power disputes in the state, regarding discrimination.

“Mumbai is facing high tariffs because it wants 24X7 power. A rural consumer who is facing load shedding up to 16 hours a day could approach MERC and the body will quash the subsidies almost instantly,” said a consumer activist.
Also, RInfra being a private entity, the state cannot give any subsidy to its consumers.

What is the solution for consumers?
“The solution lies in the problem. What we see today is the effect of the Electricity Act, 2003. But the same act also gives us, the consumer, to choose our supplier. If Tata Power’s rates are the cheapest, the consumer should switch over to Tata Power.
“Government subsidy is not an answer and cannot be the solution,” said AV Shenoy of the Energy Study Group that has been spreading awareness about power consumers’ rights.