AP Faces Power Conundrum, Kiran Reddy Flays

Even as all categories of consumers in the state battle out the severe power cuts during the summer months, they are poised to face a steep power tariff hike effective from April 1, unless the AP Electricity Regulatory Commission (APERC) and the state government come to their rescue. Chances are that both the APERC and the Congress regime may leave the gasping consumers to their fate. Despite stiff opposition from various quarters the state government is under tremendous financial pressure to affect an unprecedented hike in power tariffs, cutting across all segments of consumers. 
    
The government seems to be caught in a catch-22 situation. Unless the power tariffs are hiked, the APTransco and the four discoms are not in a position to make power purchases to meet the demand. If they don’t raise the tariffs, they may have to resort to power cuts round the year for longer duration every day. Kiran Kumar Reddy does not know how to wriggle out of this power quagmire. 
    
To quote from the aggregate revenue requirements and tariff proposals filings by the four discoms, “In the tariff order for FY 2012-13, the average Cost to Serve (CoS) as approved by the APERC for the state was Rs 4.44 per unit. Since then, there has been a significant increase in the average CoS during the (current) year and the licensees expect the trend to continue for the ensuing year. The licensees estimate the state level CoS for FY 2013-14 to be at Rs 5.61 per unit. The increase in the CoS is due to increase in both the power purchase cost and the network cost.” 
    

The discoms point out that the power purchase cost as approved by the APERC in FY 2012-13 for the state is Rs 3.10 per unit whereas the licensees estimate the power purchase cost for the ensuing year to be Rs 4.07 per unit. With the current tariffs, the revenue gap is projected to be around Rs 18,500 crore at state level. The state has planned to procure 103,535 million units of power from all sources during FY 2013-14. The total power purchase costs are estimated at Rs 42,138 crore. 
    
The total ARR of the four discoms are projected to be Rs 49,187.46 crore in FY 2013-14. As against this, the total revenue income is estimated at Rs 30,582 crore, including gross revenues at current tariffs of Rs 30,434.45 crore and other income of Rs 147.62 crore. The revenue deficit of the discoms is assessed at Rs 18,605.39 crore. The revenue yield from the steep tariff hikes proposed by the discoms is estimated at Rs 12,720.72 crore. This may still leave the discoms with net deficit of Rs 5,884.67 crore. Instead of passing the increase in power purchase cost in the form of FSA to the consumers separately, the discoms have decided to factor this in the tariff structure. Hence, the tariff revisions have been proposed for various categories. 
    
The Congress government would do well to learn a lesson or two from the excruciating experience of the previous TDP regime. For eight months, N Chandrababu Naidu’s government faced an unprecedented anti-power tariff hike agitation in 2000. Thousands were arrested and some persons were killed and injured in police firing at Basheerbagh in the city in August 2000. The succeeding Congress regime, under YSR, scrupulously avoided power tariff hike for six consecutive years. One hopes that Kiran Kumar would emulate mentor YSR and not his bête noire, Chandrababu Naidu.