April 3: Power sector companies, which have been in the dog house for the past several months, could finally see some positive sentiment. This will be largely due to an improvement in the financial health of state electricity boards. The past few years have seen state electricity boards raising the average tariff that they have been charging. The average hike for state boards has been 5-40 per cent over the past year, says JM Financial, a brokerage house.
Numbers collected by the brokerage indicate that the average selling price of power for state electricity boards had risen to Rs 3.52/unit by FY09 and is expected to increase to Rs 3.69/unit for FY10. This is an increase from Rs 3.17/unit in FY07. If these increases continue, SEB’s losses could fall over the next few years from the current level of Rs 56,200 crore. Economists tracking the government’s finances say that the losses incurred by the state utilities could eclipse the losses of oil companies if they weren’t brought under control. Increases in power tariff have been seen after almost a decade in politically sensitive states such as Haryana and Tamil Nadu, the broker says.
West Bengal, which is governed by the Left Front, has also seen rising power tariffs over the past three years. While the tariff for power supplied to the agriculture sector remains below cost, that too has witnessed a rising trend. The average tariff here had risen to Rs 1.25/unit by October last year, up from a low of Rs 1.1/unit around the time of the general elections. In some states such as Andhra Pradesh, Haryana and Karnataka, the tariff for agriculture ranges from 4-17 per cent of the cost.