Maharshtra to give power sops to investors

Mumbai: To make Maharashtra a more attractive investment destination, the state government has decided to take a hit on its return on investment (RoI) from power companies. It hopes the move will help reduce tariff for industrial customers of Maharashtra State Power Generation Co. Ltd (Mahagenco) and Maharashtra State Electricity Transmission Co. Ltd (Mahatransco) by `1 per unit.
Maharashtra has one of highest power tariffs in the country for industrial consumers, making it a major deterrent to attracting investments. The average tariff for industrial consumers in the state is `8.50 a unit, which is around `1.50-2.00 higher than states such as Gujarat, Karnataka and Andhra Pradesh.
While the previous Congress-Nationalist Congress Party (NCP) government announced a 20% subsidy for industrial consumers in January 2014, the new Bharatiya Janata Party (BJP)-Shiv Sena government scrapped the decision, claiming it was putting a burden of `750 crore a month on the state exchequer. Chief minister Devendra Fadnavis has assured industry that his government will offer them an alternative.
In the last week of April, the state government informed the Maharashtra Electricity Regulatory Commission (MERC), which is currently in the process of determining tariffs for state government-owned power companies, that while calculating the state government’s RoI, MERC should calculate it at 8% instead of 16%.
“As per the Electricity Act, 2003, promoters of utilities are allowed to get 16% RoI on their equity. So while determining the tariff, regulators include this 16% RoI in the tariff, apart from other expenses,” a senior state government official, who did not wanted to be named, said. “We have requested the state power regulator that it should calculate RoI at 8% in the case of Mahagenco and Mahatransco and suggested that this lower RoI be used to lower the tariff for industrial consumers.”
The move will reduce the government’s RoI by `2,500 crore a year but will help reduce tariff for industrial consumers by `1 per unit, he added.
Experts are sceptical about such a cut achieving the desired results and point to the huge arrears piled up by Mahavitaran, the distribution company, which stands at `7,800 crore.
Designated MERC consumer representative Ashok Pendse said, “One can have RoI only if one gets paid. In the case of Mahagenco and Mahatransco, they have huge arrears from Mahavitaran, their principal customer… I am not sure what RoI the state government is talking about.”
Anant Sardeshmukh, director-general of Pune-based Mahratta Chamber of Commerce, Industries and Agriculture, said, “It is a welcome move by the government to reduce tariff… However, had the state government taken steps to improve the performance of its power companies, it would have been a more desirable way to reduce costs and tariff.”
Source: Mint; 19 May 2015
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