Tuesday, April 3, 2012

Hefty Power Hike Counterproductive

The A P Electricity Regulatory Authority approved a whopping increase in power tariff, effective April 1, 2012. The increase for industry is very steep, ranging from Rs. 0.87 per unit for LT supply, Rs. 1.28 for 11 KV supply, Rs. 1.12 for 33 KV supply and Rs. 1.00 for 132 KV supply. In percentage terms the increase is 21%, 36.4%, 34.46% and 33.67% respectively. The increase in the supply cost of power is only 4.35% as per the data presented by DISCOMS. The industry consumes 35% of the power but pays 60% of the power cost. Thus, the industry is subsidizing some categories of consumers. But such cross subsidy has adverse economic impact on the people and the economy, as the cost of goods and services will increase by about 1% to 5%. Ultimately, it is the people particularly the poor people will end up paying higher prices for goods and services. So such a steep power tariff increase for industry is counterproductive and not in the best interests of common man and economic growth.

The industry is already paying several taxes and levies to the government and burdening the industry further with higher price hikes in power is not warranted. In addition, this tariff increase is coming up against the background of increase of 2% in Service Tax and Excise Duty, property tax, VAT increases, which will increase the prices of the goods and services. The industry has been suffering 40 to 60% power cuts when the power shortage is 10 to 15%. The disproportionately high power tariff being levied on industry is not a step in the right direction and will only escalate the price-line and the inflation and cause slowdown in the economy.

FAPCCI, therefore, contend that the hefty increase in power tariff to industry and trade is not only counterproductive but also harsh on the industry and economic growth. The APERC should have taken all these points into consideration before it approved the tariff proposals of DISCOMS and should have fixed tariff based on the principles of natural justice, economic considerations and in the spirit of a regulatory commission.

V S Raju


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