Date:12/05/2006 URL: http://www.thehindu.com/2006/05/12/stories/2006051206421700.htm

Business

Re-look at power access surcharge

Special Correspondent

Common formula results in anomalies

NEW DELHI: The Central Government is likely to modify the National Tariff Policy on power to allow state power regulators to fix the open access surcharge. This move would benefit the high-end consumers, by making it easy for them to select their electricity suppliers.

Virtually endorsing the regulators' view in this regard, Power Secretary R. V. Shahi on Thursday, "India is a large country and it is difficult to apply one formula for everyone. The issue of surcharge needs to be revisited."

"The ministry is working on the issue to see how flexible it should be made. This should happen very soon," he said, addressing a FICCI seminar on `Indian Electricity 2006'.

In January, the Power Ministry had announced the policy fixing a uniform formula for all state regulators to calculate the cross-subsidy surcharge for open access in distribution. Consumers were made liable to pay the surcharge to compensate the loss in revenue to their existing electricity suppliers arising from the consumer moving away to another distribution company.

However, on the basis of their experience, regulators had said that a single uniform formula was difficult to apply in different states and wanted flexibility in fixing the surcharge.

Central Electricity Regulatory Commission Chairman and head of the Forum of Regulators, A. K. Basu, said the surcharge was the only major unresolved issue in the policy, since as per the prescribed formula, there was a wide variation in the surcharge in different states.

On how the policy would be changed, Mr. Basu said: "I cannot say this, as the Ministry has to decide. But it is a Cabinet decision and may require an amendment [of law]." He, however, pointed out that the surcharge in terms of the formula was coming to a negative Re. 0.69 per unit in some states and Rs. 1.89 in some others.

Its implication is that in the case of some states, the utility would have to pay 69 paise to the consumers who move away to another distribution company. At the same time, in the case of some other states like Madhya Pradesh the consumer would have to pay Rs. 1.89 per unit to the existing supplier for selecting another distribution company.

The Tariff Policy had continued with the provision of cross subsidy to people below the poverty line who consume electricity below a specified level. It did not link surcharge to the average cost of purchasing power but instead to the top five per cent of purchase costs for the electricity board. Further, the surcharge is to be reduced progressively to a maximum of 20 per cent of its opening level by 2010-11.