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ASSOCHAM suggest linking of Cross Subsidy Charges to avoid states losses

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Industry body ASSOCHAM has suggested linking of Cross Subsidy Charges (CSS) with aggregate technical and commercial (AT&C) losses faced by them.

In a note submitted to the Chief Minister of Haryana,  Manohar Lal Khattar by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) says that “will ensure that as states reduce their losses, additional charges levied on industry will correspondingly decrease”.

The Associated Chamber of Commerce and Industry of India (ASSOCHAM) feels this will provide a level playing field and a fair window for private sector to operate at lower but reasonable operating cost.

The industry body lamented that the concept if CSS is higher than the Average Cost of Supply and Average Revenue realization (ACS-ARR) gap of any State, then the State has a public interest in levying CSS as a sign of protectionism.

Concept of open access to absorb excess generation of power was brought by the Government of India with a view to ensure higher operating efficiencies which shall cut down T&D losses. However, power tariffs paid by industry have increased sharply across States owing to a rise in the levy of cross subsidy surcharges (CSS) almost to an extent of 30-600%. In the State of Haryana, the CSS charges increased sharply from Rs. 930 MWh to Rs. 1570 per MWh.

The National Tariff Policy (NTP) had suggested capping the CSS at 20% of tariff. The NTP also introduced additional surcharge for consumers who shift to other sources apart from State Discoms. This is clear deviation from the fundamental principal of open access, which is one of the most important amendments suggested by the Electricity Act. While the Government of India has given the option of procurement of power through open access, the States have been levying various charges, restricting the concept and success of open access policy.

CSS is levied by state power distribution companies (discoms) to recover cost of supply. This comes at a time when most states have signed up for the Union government’s Ujwal Discom Assurance Yojana (UDAY) schedule that aims to reduce losses and improve efficiency.

According to market estimates the gap between the average cost of supply (ACS) and the average revenue realization (ARR) of state-owned discoms is around 27 per cent, and around 35 per cent in big states such as UP and Rajasthan.

The National Electricity Policy (NEP) allows states to subsidies a section of consumers. It also has provisions for levying additional charges on consumers capable of paying higher rates to make up for the ACS-APR gap.

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