NEW DELHI: High markup on electricity supplied to industrial consumers reduces global competitiveness of Indian industry, Economic Survey says, putting tariff reforms back into the spotlight.
“Across states, industrial users can pay a 10-25% markup over the cost of electricity supply. Other countries impose lower rates for electricity use. For example, Vietnam sets the electricity sale price at 10% lower rate than cost of generating electricity. Such differences in energy costs reduce global competitiveness of Indian factories, discouraging growth,” govt’s report card on economy said.
The statement points to one of the drags in the govt’s pitch for India as a global manufacturing hub. Rationalising industrial tariffs, however, is easier said than done since distribution utilities (discoms) keep household tariffs below cost by charging industrial and commercial consumers more.
Given the poor fiscal health of discoms and political risks of raising domestic tariffs, it will not be surprising if states drag their feet. The Survey noted over 7% Y-o-Y increase in generation capacity to 456 GW – largely solar and wind energy – brought down the demand-supply gap to less than 0.1% in Dec from 4.2% in 2013-14. The average power supply too improved from 22 hours in FY14 to over 23 hours in FY24 in urban areas.
