AT a time when people are grappling with high prices of many daily essentials, the government has hiked electricity prices, which is likely to cause a big ripple effect on the economy. The new rate will take effect from Sunday, and in a few weeks power consumption will increase with farmers irrigating their land and people using fans and ACs as temperatures rise.
A significant volume of electricity generation capacity has been kept unused, resulting in higher capacity payments to the power plant owners. A good number of high-cost rental and quick rental as well as oil-fired power plants are still operational. Instead of retiring the expensive oil-fired power plants, the Power Division under the Ministry of Power, Energy and Mineral Resources extended their tenures. Most of the power purchase deals were unsolicited in the name of increasing electricity generation capacity, as per the opinion of experts. If corruption is checked and irrational costs are reduced, no hike in power tariff at the bulk level will be required.
So the main reason why the consumer and retail end prices have gone up is to pay for costly oil generated power. The Power Ministry is robbing Peter to pay Paul–as it is taking the hard earned money from millions of consumers to pay for the expensive oil fired power plants which have an average generation cost of six to seven hundred percent more than gas fired plants.
Why is it continuing to extend the tenure of these plants despite the fact that these plants have a greater cost of production–costs which are continually being passed on to the consumer? One possible reason is corruption. If these plants are shelved and more efficient ones put in place there is hardly any need for power generation to cost more than it did in 2009. But the Power Ministry seems reluctant to reduce power prices.
