After enduring severe disruptions caused by the COVID-19 pandemic, the industrial sector in Andhra Pradesh is going through another rough patch as power utilities have decided to impose true-up charges and various adjustment charges on consumers. As a consequence, their monthly bills have gone up steeply in the recent past.
Energy-intensive industries are especially hit hard by fuel and power purchase cost adjustment charges, grid charges, and true-up charges. Several units have reportedly shut down their businesses due to the steep rise in the costs of production; the fall in demand, which is driven by the global recessionary trend; and now, rising power charges.
In addition to the basic (minimum demand) charges, consumers have been burdened with an increased Electricity Duty (ED). The per unit cost of power for industrial consumers is around ₹7.60 per unit, which has gone up to ₹9 per unit with the addition of true-up charges, while ED has been raised from a mere 6 paise to ₹1 per unit.
The unit cost is higher for those with captive power plants as they have to pay grid charges. The stated tariffs slightly vary depending on the sub-sector and their consumption patterns. The impact is more pronounced on textile manufacturing units, ferro alloy manufacturers, auto ancillaries, pharmaceutical units, and casting and forgings companies. The Micro, Small and Medium Enterprises (MSMEs), which account for a major chunk of the Gross State Domestic Product, are also finding it difficult to cope with the high charges.
The Andhra Pradesh Chambers of Commerce and Industry Federation recently submitted a memorandum to the Special Chief Secretary (Energy) of the government requesting him to reduce the minimum demand charges. They insisted that these charges were burdensome, particularly for the food processing industries. They asked for the proposed enhancement of ED charges to be postponed and said that industries should not be saddled with a host of adjustment charges. The MSMEs sought the intervention of the Secretary to the Government of India (Industry and Commerce).
These charges could also deter prospective entrepreneurs who are looking to invest in the State. Andhra Pradesh with its strategic location, long coastline, natural resources, and availability of land has distinct advantages for industry, but the prevailing uncertainty has cast a shadow on the industrial climate. Besides, these high power charges are being imposed just when the government is striving hard to make the State investor-friendly by improving the business environment.
The industries are also troubled by the delays in the reimbursment of the power cost, which had been announced as a fiscal incentive under the Andhra Pradesh Industrial Policy 2020-23. If industries are to survive and remain competitive, the government needs to keep the power tariffs under check. Only years of unchanged tariffs would lend stability to the industrial climate. Frequent hikes will likely have a cascading effect on profitability. The upcoming industrial corridors and the string of seaports are bound to augment the scope for flow of investments, but only if the power tariffs are kept under control.
In March, the opening day of the two-day first Global Investors Summit organised by the State government attracted investments to the tune of ₹13 lakh crore, at Visakhapatnam. While this came as good news for Chief Minister Y.S. Jagan Mohan Reddy and Industries Minister Gudivada Amarnath, most of those agreements remain on paper as companies need time to keep their word. Against this backdrop, the issue of high power bills must be sorted out as they directly affect corporate earnings.
Also, the unprecedented revision of Power Purchase Agreements by the present government has led to a legal battle which has flared up to such an extent that the Centre has cautioned the government against the consequences of tinkering with power tariffs long after they were agreed upon.
All this shows that the State’s power sector is going through a difficult period. Power tariffs are an irritant for industries which are trying to steer clear of a plethora of problems that began with the pandemic. The task on hand is to meet the burgeoning demand for power while keeping the tariffs affordable so that industries can survive this critical phase.
