Why Fadnavis’s power tariff slash may push Maharashtra into ‘dark age’

While Maharashtra Chief Minister Devendra Fadnavis’s announcement of a breakthrough plan to reduce power tariffs by 26 per cent over five years has generated a buzz, energy experts warn that the move could destabilize the power sector and potentially push the state into a “dark age”.

Though the tariff reduction may appear promising now, the initiative would force scores of residents and industries to pay hefty charges if they consume over 100 units.

The Maharashtra State Electricity Distribution Company (MSEDCL/Mahavitaran), the largest electricity distribution utility in India, supplies power to close to 3 crore consumers, including domestic, agricultural, commercial, and industrial sectors. Mahavitaran supplies electricity to over 400 cities and over 41,000 villages in the state, with a current daily supply capacity of 26,000 MW using its 4,230 substations.

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Fadnavis’s calculations

According to Fadnavis, for 70 per cent of consumers using less than 100 units of electricity, a maximum rate reduction of 10 per cent will be achieved.

In a post on his X handle, Fadnavis, who is also the energy minister, said, “For the first time in the state’s history, electricity tariffs will be reduced — starting with a 10% cut in the first year, and a total 26% reduction in phases over the next 5 years. Thanks to the Maharashtra Electricity Regulatory Commission (MERC) for approving MSEDCL’s proposal to reduce tariffs, a move never attempted before.”

“Previously, petitions used to be filed for tariff hikes of around 10%, but this time, a petition was filed for a reduction — benefitting domestic, industrial, and commercial consumers alike. Nearly 70% of consumers in the State use less than 100 units and they will benefit the most from the 10% tariff cut,” Fadnavis added in the post.

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What experts say

But experts say the reduction of power tariffs for lakhs of customers might look promising now, but it would affect consumers in all segments in the long run.

Explaining how the new tariff reduction would actually result in increased charges, power sector expert Sudhir Budhay said the reduction of tariff would help only BPL category consumers, who would anyway consume below 100 units.

“On average, any middle-class family would consume above 100 units, and that chunk of consumers would be paying increased fares. Domestic consumers will see a 5 per cent rise in tariff from July 1 onwards, for consumption above 100 units. In the case of industries and commercial segments also, only small business units would benefit from the reduction. Even medium-scale industries would end up paying extra as they would consume above 100 units,” he said.

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New tariff

According to the new tariff, for a domestic consumer, the base energy charges are Rs 10.29 per unit in the 100–300 units category. The same will rise to Rs 11.10 per unit. In the 300–500 units consumption category, the rise will be from the current Rs 14.55 per unit to Rs 16.85 per unit.

For domestic consumers who use over 500 units, the rise will be from the current Rs 16.54 per unit to Rs 19.15 per unit. In the commercial category, there will be a marginal rise in base charges from Rs 8.52 per unit to Rs 8.90 per unit from July 1 onwards.

Fadnavis has argued that the tariff reduction has been possible because the state government has increased reliance on solar power under the Chief Minister Solar Agricultural Feeder Scheme 2.0, and the upcoming power purchase agreements focused on green energy would help increase production at a cheaper price.

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Not a solution

On the other hand, Maharashtra faces its highest debt projection in its history at Rs 9.3 lakh crore and the steepest revenue deficit of an estimated Rs 45,891 crore for 2025–26.

Experts say with huge infrastructure projects and new power projects being planned, this tariff might not help solve the energy and financial crisis. Since the new tariff would help a few and burden the industry and commercial segments, it would affect the financial returns to the state.

RB Goenka, former director of Mahavitaran, says the power generation plans look ambitious but fail to meet reality. He also mentioned that MERC had bypassed many standard regulatory practices before arriving at this new tariff. He had filed an intervention in the matter. MERC did not conduct a public hearing before issuing the revised order.

“Go across villages, several farmers suffer from severe power outages. There are days when they cannot operate pumps at all. The announcements and promises look great. In the case of industries and commercial segments, they have to spend more. Already, many industries like steel companies are trying to move out of the state. With the new tariff and extra charges, tax components, industrial growth would be affected badly,” said Goenka.

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Biggest sufferers

Both Budhay and Goenka said domestic and industrial consumers who invested in setting up solar units would be the biggest sufferers under the new rules. They pointed out that the new time-of-day (ToD) format introduced would make rooftop solar completely unviable for consumers over 10 kW capacity.

In the case of industries that produce 20 kW, they have to consume the extra power only during 9 am to 5 pm and not use it during the peak hours from 5 pm to 12 midnight.

“Fadnavis spoke only on power reduction for BPL domestic consumers. Maharashtra’s growth story was a success because of its industries. Several industries had invested heavily in erecting solar units as they wanted to benefit from the state policy on renewable energy. With the new rules, banking of surplus solar power generated is being discontinued as sought by Mahavitaran. Now, industries having 20 kW capacity, energy banked during solar hours and normal hours, shall not be drawn during peak hours, that is from 5 pm to 12 midnight, when they need it the most,” they said.

Vishvas Pathak, independent director of Mahavitaran was not available for comment. The Federal will update his comment once he is available.