July 18, 2013-As India’s electricity regulator considers allowing a rise in tariffs for a power company hit hard by rising coal prices, analysts at Nathan India question whether a tariff hike is necessarily bad for consumers.
Sangeeta Singh and Nandita Jain, poring over data from independent ratings agencies and India’s Planning Commission, compared the impact of “corporatisation” and utility unbundling on consumers in four states: Gujarat, Maharashtra, Bihar and Tamil Nadu. They found that undbundling and corporatisation creates efficiencies that may very well outweigh the burden of higher tariffs. And they conclude that while low tariffs generally benefit consumers, tariffs that do not cover costs prevent new firms from entering the market—which reduces competition, induces supply shortages, and eventually hurts consumers.
Read their full report: Nowhere Near a Power Trip in The Financial Express, July 17, 2013.