Reports of 37 Per Cent Electricity Tariff Hike By MSEDCL Are Incorrect: Vishwas Pathak

Mumbai, 28th January 2023: The reports published in various newspapers that MSEDCL has proposed an average increase of Rs 2.55 per unit i.e. 37 per cent in the next two financial years in the petition filed with the Maharashtra Electricity Regulatory Commission to cover the revenue deficit is wrong and misleading.
MSEDCL has proposed an average tariff increase of 14 per cent and 11 per cent per annum in the two financial years 2023-24 and 2024-25 respectively to meet the revenue shortfall of six years and the average proposed tariff increase is close to Rs one. Vishwas Pathak, Independent Director of MSEDCL said that the proposed average tariff increase includes fixed size, power size, and transmission size.

He said that the revenue estimated for MSEDCL by the Electricity Regulatory Commission while approving the multi-year tariff structure for MSEDCL from the financial year 2020-21 has not been collected due to various reasons including the increased cost due to Corona pandemic and the coal crisis. As a result, considering the revenue deficit in the last four financial years and the expected deficit in the next two financial years, MSEDCL has submitted a proposal for an electricity tariff hike to compensate for the six years of deficit.

After there was a shortage of coal in the country, imported coal was used for power generation. Due to this, when the power generation companies demanded increased tariffs, MSEDCL challenged it before all the judicial bodies including the Regulatory Commission. Eventually, the production companies had to pay increased funds as per the Supreme Court’s interim order. This resulted in an additional expenditure over and above what the Commission had sanctioned for general distribution in the multi-year tariff structure. As a result, the revenue deficit of MSEDCL increased.

Apart from this, there is an important different reason for the revenue deficit this time. The concept of cross-subsidy in electricity tariffs has been used in the state for many years. It means that industrial and commercial consumers are charged a little higher electricity tariff and the income generated from it is compensated for the concession given to farmers or small families in electricity tariff.

During the financial years 2020-21 and 2021-22 due to the corona pandemic, financial transactions came to a standstill due to the lockdown. As a result, the power consumption of industrial and commercial consumers has reduced drastically and the recovery of excess tariffs from them has been reduced.

On the other hand, the electricity consumption of domestic consumers increased while the electricity consumption of agriculture also continued. Both these units get power supply at subsidized rates. MSEDCL did not carry out load regulation during the Corona period. Along with that, maintenance repairs are maintained. Even though the consumption of electricity by domestic consumers and farmers continued during the Corona period, due to the situation at that time, many consumers delayed the payment of electricity bills.

At the same time, the cost of electricity procurement and transmission continued to rise. In such a situation, MSEDCL continued to provide uninterrupted electricity to the customers by withdrawing the loan. The interest burden on that debt is reflected in the revenue deficit.

Due to the coal shortage in 2022, load balancing was done in 18 states but not in Maharashtra. As a result of all this, the Electricity Regulatory Commission did not get the expected revenue and the revenue deficit of MSEDCL increased. In terms of revenue deficit, it is expected to take into account the increase in prices of goods and services and increased economic turnover in the last 23 years while criticizing the highest demand in 23 years.