Jaipur: Inn Rajasthan RajasthanPeople pay one of the highest rates for electricity. The natural disadvantage of being located away from coal resources, resulting in a power purchase cost of Rs 4.81 per unit, with UP being the highest in the country, is not the only reason. Another major factor is the interest burden on discoms’ debt. In fact, at Rs 1.40 per unit of electricity, the interest paid by discoms for their loans is the highest in the country.
Recently, the state energy department’s board decided to pull out of high power purchase agreements to reduce the cost of electricity. an offer from Rajasthan Vidyut Utpadan Nigam Limited to retire two units of Kota Super Thermal Power Station 220 MW is pending with the government.
Discoms used cheap in the last financial year Lightning Purchase cost from and from power exchanges came down by 20 paise per unit but the impact of legacy burden and natural loss is too great to pass on to the consumers. But more such strategies are being discussed to bring down the electricity tariff in the state which is the highest in the country.
TOI analyzes the reasons that led to the hike in power tariff in the state and why it is proving difficult for the government to provide relief.
High power purchase cost:
It contributes about 80% to the total cost of supply of discoms. Conventional thermal power plants are using coal sourced from outside the state and the high logistics cost is making power generation costly. The power purchase cost of Rajasthan is 4.81 kWh, which is about 0.08 kWh higher than the national average of 4.73 kWh. The power purchase cost for other states (except UP) is lower than the all India average. In some states it is half as much as in Rajasthan.
Rising interest cost on loans of discoms:
From the demerger of discoms in 2000 to 2011, there were only two tariff revisions. While costs increased by 71 percent during this period, revenues increased by only 2%. To meet this increase in cost, the discoms had to take short-term loans. After 2011, there have been some tariff revisions but by then the interest cost had gone up. Non-timely tariff revision and no hike in tariff in 2016-17, 2017-18 and 2018-19 forced the discoms to meet the deficit through loans. As a result, the interest cost has gone up and is the highest in the country.
Higher depreciation cost, more users paying less:
Rajasthan is the largest state with the lowest population density in the country. Hence the infrastructure cost per consumer is among the highest in the country. Infrastructure requires both high capital expenditure and depreciation cost. Also, Rajasthan has the highest share of consumers in the country at low stress levels (domestic and agricultural). This leads to high technical and transformer losses.
other reason:
Inexpensive hydel sources account for less than 10% of the electricity portfolio in Rajasthan, while the share of cheap hydel power in other neighboring states is much higher. The state faces a huge gap between peak demand (14,000mw) and average demand (9,500mw), due to which discoms have to pay fixed charges even if power is not procured from generating companies. Third, despite the availability of low-cost renewable energy, discoms will continue to pay fixed charges for long-term agreements with conventional generators.
Further hike could have been avoided by timely tariff hike:
From 2007-08 to 2013-14, the cost of supply had almost doubled, but the rates were almost half of the cost, resulting in huge losses to discoms and debt liabilities. Had the discoms been able to regularly revise their tariffs to 3-4% annually in line with inflation, this would have avoided the need for large and sudden tariff hikes and would have reduced the impact on consumers.
Recently, the state energy department’s board decided to pull out of high power purchase agreements to reduce the cost of electricity. an offer from Rajasthan Vidyut Utpadan Nigam Limited to retire two units of Kota Super Thermal Power Station 220 MW is pending with the government.
Discoms used cheap in the last financial year Lightning Purchase cost from and from power exchanges came down by 20 paise per unit but the impact of legacy burden and natural loss is too great to pass on to the consumers. But more such strategies are being discussed to bring down the electricity tariff in the state which is the highest in the country.
TOI analyzes the reasons that led to the hike in power tariff in the state and why it is proving difficult for the government to provide relief.
High power purchase cost:
It contributes about 80% to the total cost of supply of discoms. Conventional thermal power plants are using coal sourced from outside the state and the high logistics cost is making power generation costly. The power purchase cost of Rajasthan is 4.81 kWh, which is about 0.08 kWh higher than the national average of 4.73 kWh. The power purchase cost for other states (except UP) is lower than the all India average. In some states it is half as much as in Rajasthan.
Rising interest cost on loans of discoms:
From the demerger of discoms in 2000 to 2011, there were only two tariff revisions. While costs increased by 71 percent during this period, revenues increased by only 2%. To meet this increase in cost, the discoms had to take short-term loans. After 2011, there have been some tariff revisions but by then the interest cost had gone up. Non-timely tariff revision and no hike in tariff in 2016-17, 2017-18 and 2018-19 forced the discoms to meet the deficit through loans. As a result, the interest cost has gone up and is the highest in the country.
Higher depreciation cost, more users paying less:
Rajasthan is the largest state with the lowest population density in the country. Hence the infrastructure cost per consumer is among the highest in the country. Infrastructure requires both high capital expenditure and depreciation cost. Also, Rajasthan has the highest share of consumers in the country at low stress levels (domestic and agricultural). This leads to high technical and transformer losses.
other reason:
Inexpensive hydel sources account for less than 10% of the electricity portfolio in Rajasthan, while the share of cheap hydel power in other neighboring states is much higher. The state faces a huge gap between peak demand (14,000mw) and average demand (9,500mw), due to which discoms have to pay fixed charges even if power is not procured from generating companies. Third, despite the availability of low-cost renewable energy, discoms will continue to pay fixed charges for long-term agreements with conventional generators.
Further hike could have been avoided by timely tariff hike:
From 2007-08 to 2013-14, the cost of supply had almost doubled, but the rates were almost half of the cost, resulting in huge losses to discoms and debt liabilities. Had the discoms been able to regularly revise their tariffs to 3-4% annually in line with inflation, this would have avoided the need for large and sudden tariff hikes and would have reduced the impact on consumers.
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