Cross Subsidy in the Electricity Business.
The Electricity business in the country,
which started in the year 1887, is now spread to almost 85% of the country geographically
with an installed capacity of more than 2.5 million MW with a per capita
consumption almost touching 1000 kwhr is looking for further reforms.
The electricity business in this country is
now governed by the Electricity Act, 2003, which has replaced all earlier
statutes. Electricity business now is an
integrated with Grid n with a very few places working on a stand-alone
system. Electricity is electron movement
and produced with heterogeneous energy produce of Coal, Hydel, Gas, Diesel, Nuclear and
Renewable. The per capita consumption is
still lower of around 1000 Kwh comparing
to world average of 2500 units. There
are peak shortages of 20% the country is facing. The peak requirements also vary from state to
state and city to city. Time zone
difference of 30 minutes is also playing a role, as Eastern Sector gets early
sunrise and sunset. The country has got
now almost 15% of its requirements through captive sources. The electricity has seen number of reforms
and the latest reform, which unbundled the SEBs, brought the entire function
under a Regulatory regime is now seeing a worst phase in the current
century. At one hand, the country has
got some excess capacities; on the other, there is a power shortage. The country has got two grids, but inflow to
one grid to other grid is limited to
only 4000 MW.
As far as tariff design is concerned, it
looks like that at some places the electricity is available as low as Rs.3/-
and at other places it is more than
Rs.10/.-One of the major factors of differences is attributed to different cost of supply is that electricity generation of
different regions is different as Energy produce like Coal need to be
physically transported by different means like Rails, Road and Water Ways and
transportation of coal depends on various factors and it has seen jump and
volatility .
As per the report available, the average cost of power generation is Rs.4.88 per Kw is as
high as Rs.7.75 (Bihar) and as low as Rs.1.88
(Sikkim). Other factor is distribution
of categories of consumers . As per
standard practice, the electricity consumers are distributed in following
categories and there share consumption
is
·
Industrial - 206457 MW- 36%
·
Commercial - 50583 MW- 8%
·
Residential - 149628 MW- 26%
·
Agriculture - 136400 MW- 24%
It may also be seen that all consumers are
further sub categorized with as high as 84 categories in respect of Andhra
Pradesh . Thus, the consumers at lower voltage
need to pay additional charges for wheeling out of electricity and thus makes
it a point that retail consumers should pay a higher cost than the bulk
consumers, but the bulk consumers are now paying a very high cost compared to
retail consumers, which is ironical in any of the businesses. Further, for the same voltage, consumers need
to pay different tariff inspite of the fact that the electricity being from the
same source.
Another factor is that electricity tariff need
to subsidize by the consumers for subsidized consumers. This is termed as Cross Subsidy and as per
Electricity Act, 2003, the cross subsidy has to be reduced in a phased manner,
but on the contrary, the cross subsidy element is going up in all cases. Some of the Cross Subsidies right now being
imposed by several states, like Madhya Pradesh, Maharashtra, Tamil Nadu, Andhra
Pradesh, Rajasthan& Gujarat are tabulated in the Annexure enclosed.
Another reason that,power market, despite
available of around 50 power traders in the country, right now are busy in
making a huge profit of 7 paisa per unit for scheduling the power from one
state to another without giving a sense of trading. The power trading which has almost touched
10% of the country’s production is now selling from one generating company to
another DISCOM and in fact in some of the stats taking the power from generator
and selling to the local DISCOM after adding up their trading margins. The services offered by them is not directly trading but only of liaisoning
without taking any risk. Last year, as
an estimate, around Rs.400 Cr has been earned by 10 traders, 2 exchanges, who have just
employed around 200 professionals and without any risk involved requirement for
trading of any business. This money has
been accounted in most of the tariff and could have reduced power cost in turn
to consumers.
Thus, in a nutshell,power sector is looking
for major reform where consumers can buy power at affordable rate and project
developers can sell at an affordable capacity.
The best course could have been introduction of uniform tariff for all
domestic and commercial consumers or at equivalent voltage level all across the
country and almost to bring vibrancy by making consumers of Open Access under a
free market where they can afford to buy power at market driven rate. For this, a Cross Subsidy element can be
brought out as ± 20% of cost of supply,
which is also as per Electricity Act.
+++++++++++++
