FE Editorial : Power rates must go UP

Those protesting the average 20% hike in power tariffs in Uttar Pradesh—in some cases, the hike has been in the 50% range—would do well to keep a few things in mind. One, the hike has come after two years, and that one too came after a gap of two years—in other words, the hike looks a lot higher than it actually is, though this applies not just to Uttar Pradesh but to most other states as well. Two, the important thing to keep in mind is that consumers in UP were paying just R3.70 per unit of power as compared to the average procurement price of R5.87 a unit—that’s a subsidy of 37%. After the hike, this gap has come down to a more manageable 25%, but that’s based on the unrealistic assumption that power procurement costs will not go up during the year—in all probability, power subsidies in UP will continue to remain at the 30-35% level, implying another round of hikes may soon be needed. Around 70% of the R1.9 lakh crore all-India power sector losses last year were contributed by discoms in Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh.

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