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Comments and Suggestions on Amendment of Para 8.3A of the National Tariff Policy

Author(s): Prayas (Energy Group) Publication Date: September, 2018

In the context of the draft amendment of the National Tariff Policy, 2018, the Ministry of Power circulated a draft amendment to Para 8.3A of the National Tariff Policy as outlined in Office Memorandum No.23/02/2018-R&R dated 10th September, 2018. This is enclosed below. The proposal seeks to promote tariff and cross subsidy design across states based on sanctioned load and consumption instead of types of use (e.g- residential, industrial, commercial, agricultural) as is the current practice.

There is significant flux in the electricity sector due to sales migration, increasing cost of supply and reducing room for cross subsidy as highlighted in the recent PEG report, ‘Electricity Distribution Companies in India:Preparing for an uncertain future’. This was also highlighted in PEG’s submission on the proposed amendments to the National Tariff Policy, 2018, dated 18th July 2018. Given this reality, and the need for a change in the business model of the distribution companies, it is important to ensure a phase-wise approach to reduction in cross subsidy. Such a planned approach will reduce the tariff shock on small consumers in the future and ensure a less financial impact on the cash-strapped DISCOMs during the transition.

In this context, the proposal by the Ministry of Power is a welcome step not only towards tariff rationalisation but also towards the reduction of cross subsidy. However, any shift from the current approach should be done:

  • in a phase-wise basis over a five year period,
  • without loss of information captured by the current, established billing frameworks,
  • while minimising the impact on small consumers ,
  • with support from state governments to ensure a smooth transition
  • while ensuring space and time for mid-course corrections and accounting for state specific realities.

Further there is need for clarity on the treatment for unmetered consumers, especially agricultural consumers, the provision of exemptions to certain categories like electric vehicle charging stations and the modalities for providing rebates. Prayas (Energy Group)’s comments and suggestions in this regard are enclosed below.

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