Maharashtra big-bang poll promises on cheaper power come at a cost

During the recent Maharashtra assembly election campaign, two of the main parties, the Shiv Sena and Nationalist Congress Party (NCP), mentioned the cost of electricity in their manifestoes. The former promised a 30 per cent discount for consumption up to 300 units. The NCP’s promise included keeping industrial electricity rates at par with other states and waiver of electricity bills to farmers, on the lines of measures taken in Tamil Nadu and Andhra Pradesh.

There is speculation now on what could happen on this front. A legal procedure has to be also noted. "The state electricity regulator decides on aggregate revenue requirements of a discom (power distribution company) and fixes electricity tariffs (rates) for each category of consumers to match this. If a state government wants a lower tariff in any category, it has to provide monthly cash compensation to a discom," said Debashish Mishra, partner at consultants Deloitte Touche Tohmatsu.

Consumers in Delhi enjoy free electricity up to 200 units a month. This has led to a significant number getting zero monthly bills. Tamil Nadu has up to 100 units of free consumption.

Maharashtra, in comparison to Delhi, has a much larger consumer base. According to the MAHADISCOM website, 73 per cent of its 25.4 million consumers are in the residential category.

In addition to the Maharashtra State Electricity Distribution Company (MSEDCL), private companies Adani Transmission and Tata Power also distribute power in Mumbai. An e-mail query sent to both companies for this report went unanswered.

“Private discoms have no role to play in the offered discounts. If the next elected government wants to keep a promise, it will have to enter into a commercial deal with the providers and pay for the difference,” said a person with knowledge of such developments, who did not wish to be identified.

In an October 13 report on state discoms, on the Power Finance Corporation website, rating agency ICRA flagged high dependence on subsidy support from the state government and delay in subsidy support as some of the key concerns for MSEDCL.

People in the know add, “What MSEDCL receives as subsidy and what it pays back to the government as dues is the same. There is no net receivable to speak of. What ICRA has highlighted was merely delay in formalities for the same. Any discount promised in the election manifesto will also need to be passed on as subsidy to the discom.

It is not clear what would be the impact of such a discount. “In a state like Maharashtra, for 300 (free) units for residential consumers, the subsidy number will run into thousands of crore,” said an industry expert who did not wish to be identified.