The Maharashtra State Electricity Distribution Company (MahaVitaran) has painted a bleak picture of what would happen if the Maharashtra government decided to reduce tariff in the range of 10 to 20 per cent without protecting its finances.

MahaVitaran has indicated that it would default and become insolvent if it failed to collect Rs 3,550 crore a month from residential, commercial and industrial consumers across the state.

MahaVitaran has pleaded with the Congress-Nationalist Congress Party government to infuse a total of Rs 7,099 crore in the short term in the wake of a tariff cut.

MahaVitaran’s argument is crucial as the state cabinet on Monday is expected to accept the recommendations made by the committee led by industries minister Narayan Rane to cut tariff across consumers in order to counter the Aam Aadmi Party effect in the run up to the Lok Sabha elections in the state.

MahaVitaran’s monthly payment is Rs 3,750 crore towards power purchase (Rs 3,000 crore), debt servicing (Rs 250 crore), employee cost (Rs 300 crore) and operation and maintenance cost (Rs 200 crore). Already, there is a deficit of Rs 200 crore which, MahaVitaran said, would have to recovered from agricultural consumers. Besides,



MahaVitaran has insisted that non-paying agriculture consumers would have to be disconnected. Of MahaVitaran’s total 21.4 million consumers, 14.3 million are residential, 3.7 million agricultural, 1.47 million commercial and 3,70,000 industrial of which 12,000 are high tension consumers, with a monthly consumption of 1 Mw and above. MahaVitaran has estimated that a 20 per cent cut in the average billing rate (ABR) would cut industrial tariff by 87 paise to Rs 7.45 a unit from the present ABR of Rs 8.32 a unit.

“The removal of high tension powerloom subsidy would cut tariff by 63 paise a unit and the state government would have to provide Rs 190 crore to MahaVitaran. The Maharashtra government would have to give as high as Rs 3,913 crore, following a tariff cut of Rs 1.22 a unit after MahaVitaran passes benefit of electricity duty and tax on sale of energy to industries. Further, the state government would have to shell out Rs 646 crore to MahaVitaran due to 20 paise a unit cut in tariff after excess of electricity duty collected is passed on to industrial consumers,” a senior minister told Business Standard.

Moreover, the minister said the state government would have to compensate MahaVitaran with Rs 850 crore after a 27 paise a unit cut. The reduction in renewable power obligation would result in a 6 paise fall in tariff and state government would have to provide Rs 200 crore to MahaVitaran. The state government's outgo towards MahaVitaran’s debt servicing would be worth Rs 1,300 crore after a tariff cut of 40 paise.