Electricity prices set to surge in these five Indian states after the Supreme Court’s verdict on power purchasing agreements

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  • The Supreme Court passed a new verdict on the purchase of electricity that includes shifting the burden of higher tariffs onto the consumer.
  • The burden amounts residents shelling out an additional ₹129,000 more for electricity in the coming 30 years.
  • As a result, residents of Haryana, Rajasthan, Gujarat, Punjab and Maharashtra will most likely have to pay higher prices for their electricity consumption.
India’s energy demands are the second largest in Asia, and petrol prices already surging in the country. And, after the Supreme Court’s decision enabling power producers to negotiate tariffs, electricity is set to get more expensive in Gujarat, Haryana, Rajasthan, Punjab and Maharashtra.

The big-wigs in the electricity sector, Tata Power and Adani demanded higher tariffs to balance their losses worth ₹220 billion owing to an increase in prices of coal by Indonesia.

The price hike will only kick in once the power purchasing agreement is signed by Central Electricity Regulatory commission (CPEC). All the power consumers will then have to pay ₹129,000 more for their electricity bills spanned out over the next 30 years.

The reason only five states will be hit by higher tariffs is because power distribution companies in those states have signed a long-term agreements. So excess burden will be shifted from Tata Power and Adani to these power distributors.

If both companies manage to pass on the burden of their losses through negotiating terms and tariffs, their power plants can go back to functioning at full capacity.

The burden imposed on Gujarat (₹900 billion) is the highest among all the five states, while people in Haryana will bear an additional cost of ₹180 billion against their electricity bills. Meanwhile consumers in Maharashtra and Rajasthan will have to pay up ₹100 billion and ₹50 billion respectively, according a recent media report by The Wire.

The controversy

The Supreme Court recently approved the recommendation made by a high-powered panel seeking changes in the power purchasing agreement. The changes requested included shifting burden of higher tariffs on to consumers rather than the suppliers.

So even though the decision by the Indian apex court is a relief for energy producers, it isn’t the best news for consumers. The electricity regulatory body CPEC has the new amendments to come into effect within two months.

Challenging the Indian Supreme Court’s ruling, two consumer rights groups – Energy Watchdog and Prayas – filed a petition with suggests of alternative solutions that the court could implement instead.

The plants of Adani, Essar and Tata demanded to pass on burden of accumulated losses to power distributing companies after extending losses.
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