NEW DELHI, Aug 21 � Stating that suppressing of energy prices would not help, the Planning Commission has suggested increasing electricity tariffs while providing targeted subsidy for poor people, reports PTI.
�... Electricity tariffs are lower than they should be for many categories of consumers over (and) above that of agriculture, which jeopardises the financial position of the discoms. A transition to more rational energy pricing requires upward adjustment in all these prices,� according to the Approach Paper for the 12th five-year Plan (2012-17).
Noting that electricity to the consumer is underpriced, the Approach Paper pointed out that most state regulators have shown a tendency to hold back tariff adjustments, typically under political pressure.
�Suppressing energy prices will not help. There is a case for insulating the poor from these price increases by a targeted subsidy but what we have at present is a much more general subsidy,� it pointed out.
Most of the power distribution companies (discoms) in the country are in poor financial health, especially as they are adversely impacted by a mismatch between power tariffs and cost incurred in generating electricity.
Losses incurred by discoms are estimated to have touched about Rs 70,000 crore in 2010-11. These losses are projected to further rise to as much as Rs 1,16,000 crore by 2014-15.
As per the Approach Paper, increasing prices is never easy, but also true that �our ability to grow rapidly in a world of high energy prices depends crucially on our ability to adjust to these prices�.
In July, the Reserve Bank of India (RBI) had said that given the increases in coal and mineral oils prices, power tariffs are likely to rise in the near-term.
Stressing that utility prices, especially electricity, may need to be revised up to cover costs, the central bank had said this and other factors could become a source of �likely price pressures during the course of the year�.
The country saw a power shortage of 8.5 per cent in 2010-11, which is estimated to further rise to 10.3 per cent this fiscal.
