UDAY Scheme for Discoms

Explained: Why power costs vary across states


From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Discrepancies in Indian power sector

  • Recently a MP from Rajya Sabha suggested that power tariffs should be uniform across the country so that affordable power is available to all.
  • He complained that consumers in Punjab paid Rs 8 per unit of electricity, much more than consumers in neighbouring Himachal Pradesh and J&K.

Power tariffs across state

  • The electricity tariff paid by consumers in each state is directly reflective of the cost of power procurement by the power distribution companies (discoms) in the state.
  • There are state-specific factors for this.
  • So, states such as Jharkhand or Odisha or Chhattisgarh, which have had coal-fired thermal capacity, would typically have lower tariffs because of the base-load capacities that they possess.
  • Or, states such as Himachal or Uttarakhand would have low tariffs because of hydropower capacities .
  • On the other hand, a state like Gujarat, which has capacities based on imported coal, will have comparatively higher tariffs.

So is the idea of having a flat countrywide rate feasible?

  • The State Electricity Regulatory Commissions (SERCs) decide on the power tariff after utilities file their cost of power with the regulators.
  • Because power tariffs entail a number of state-specific factors a uniform nationwide tariff is a proposition that would be difficult to implement.
  • Electricity was a state subject and there has to be consensus for uniform power tariffs among state players.
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