Hike in power tariff in HP on cards
Rakesh Lohumi
Tribune News Service

Shimla, March 24
The move of the government to supply its share of free power from various projects to the State Electricity Board at market rate will make a steep hike in electricity tariff inevitable.The government provides about 600 to 700 million units of power to the board to meet the domestic demands and, so far, it was being supplied at the rate determined by the State Electricity Regulatory Commission.

Accordingly, the board had to pay only Rs 2.87 per unit in 2009-10 which was much lower than the average sale price of Rs 3.60 per unit. It indirectly helped the fund-starved board, which had accumulated losses to the tune of Rs 260 crore and running an overdraft of over Rs 570 crore.

However, during a recent meeting of the State Regulatory Commission advisory committee, the government indicated that it would supply power to the board at market price, equivalent to the rate at which the power finance corporation was purchasing from it. As such, the government power will cost the board around Rs 6 per unit, raising its power purchase cost by over Rs 200 crore.

The board has projected the aggregate revenue requirement (ARR) of Rs 2,872 crore for 2010-11 as Rs 2,340 crore was approved by the commission for the current financial year. The average tariff will shoot up from Rs 3.60 to Rs 4.49 per unit if the ARR is approved as it is. In case the government sticks to its stand, the tariff will go up to Rs 4.79 per unit, 50 paise higher than projected in the multi-year tariff plan.

The domestic consumers will have to bear the brunt of the hike as power subsidy has been frozen at Rs 140 crore under the agreement signed by the government with the World Bank for availing Rs 900 crore development policy loan. A senior official of the board said the only alternative to a steep hike in the tariff was to impose power cuts on industries. The board worked out that a three-hour cut would save Rs 1 crore a day which meant a saving of Rs 365 crore through the year.

The implementation of revised pay scale has sharply increased the employee cost, which is projected to go up from Rs 605 crore approved for the current year, to a whopping Rs 860 crore. The commission had not allowed the hike on this account in the current year as the Pay Commission report was not implemented when tariff was announced. However, now that the report has been implemented, the additional financial burden will be included in the ARR