The Hindu : Investment will be hit, says CII

Online edition of India's National Newspaper
Thursday, Oct 10, 2002

Southern States

Southern States - Kerala

Investment will be hit, says CII

By Our Special Correspondent

KOCHI Oct. 9. The Confederation of Indian Industry (CII), Kerala chapter, has protested against the hike in power tariff. The proposal to enhance the tariff for industrial consumers, across-the-board, by 50 paise per unit is a retrograde step, it alleged.

It said that the industry, which consumes only 36 per cent of the total power, accounts for 47 per cent of the total revenue generated by the Kerala State Electricity Board (KSEB). The domestic sector consumes 45.44 per cent and accounts for only 27 per cent of the total revenue. Industry still cross-subsidises the other segments, and any move to penalise the industry would take out the competitive edge and would drive away potential investors in the State, it said.

The CII felt that the Government has not addressed the issue holistically. The KSEB should face the issues in the short term through a two-fold method_that of power shortage and revenue generation. It recalled that the confederation had put up a proposal for optional high-cost power wherein the average consumption based on consumption for the last six months could be arrived at and existing tariff could be applied for industrial units consuming up to 75 per cent of the average consumption. Enhanced tariff of 50 paise per unit could be charged for industrial units consuming over and above 75 per cent of the average consumption. This would not only reduce the peak load but also be an incentive for saving energy, CII noted. Computerised billing procedures and monthly collection through banks will ensure timely recovery and save interest. The transmission and distribution losses at 35 per cent, as against the international benchmark of 15 per cent, huge construction over-runs due to diversion of capital loans to revenue expenditure, huge cost of borrowings (with the existing interest rate at 10 per cent the KSEB still pays interest at 19 per cent), lack of a proper vigilance system against widespread theft, estimated at approximately Rs. 120 crores per year, replacement/repair of faulty meters, pilferage under the umbrella of agricultural subsidy and improper inventory control coupled with lack of fiscal discipline are the primary causes for sickness of the KSEB, they said.

The Indian Chamber of Commerce and Industry president, Bharat N. Khona, feared that the decision to enhance tariff would be a burden to all. It would push up manufacturing cost, rendering most of the industrial units unviable.

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