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The Bangalore Electricity Supply Company (BESCOM) proposed to increase tariff by about 50% and is expected to file their proposal with the Karnataka Electricity Regulatory Commission (KERC) by the end of the month. This comes following the news late last year of proposal various state electricity regulatory bodies including Tamil Nadu and Delhi looking to hike up the consumer price of electricity as cost of generation from conventional sources continue to rise.

Most of the electricity generation capacity currently installed in the country is based on thermal power which uses coal as the fuel source. There has been significant problems in securing coal to power these power plants. The shortages have been directly linked to the increasing price of coal and coal imports from abroad. Large IPPs such as Reliance Power, Jindal etc. have been forced to put the development of their large scale power projects which were expected to power our growing economy because the tariff they have been offered currently are are not enough to make setting up the power plants viable. Coal, which currently trades at over $100 per ton would have to be secured under long term contracts at a price below $85 per ton to make these power plants viable. Under current scenarios, this seems highly unlikely suggesting that the cost of electricity generation has increased much faster than expected and hence the price of electricity must reflect the same to accommodate this rise.

The electricity tariff in most states across the country has not been revised for a considerable amount of time, while the cost of generation and transmission has increased significantly. This has led to a scenario where almost all electricity boards in the country are reeling under debt. It is only obvious that the price of electricity be increased by significant amounts – about 25% to 50% followed by small rises to ensure that these companies can pull themselves out of this rut that they have fallen into.

The rise in electricity tariff is essentially a blessing in disguise – cost of conventional power will only continue to increase, while that of renewable energy only decreases over time as demonstrated by the cost of solar generation falling from about Rs. 11 per kWh to about Rs. 8.7 per kWh over the span of just a year. This would mean that grid parity would be reached much sooner. Further, an almost forced shift to renewable energy sources would serve to bolster energy security as we would then be less dependent on fossil fuel imports to power the nation into the future.