Governments & Numeracy :Case study of Chamundeshwari Electric Supply Corporation

    Come the month of April, our Mysore  electricity supplier M/s Chamundeshwari Electricity Supply Corporation promptly revises the tariff rates without fail. I had seen, it is almost 30% increase in the last 3 or 4 years. It is more than the annual inflation index.

One major reason is ever increasing the administrative overheads.  Despite increase in solar power supply the CESC is unable to control the inflationary trend in its operations.

Leave that alone. Whenever they have to hike the power tariff at least it should encourage the Low Energy Consumers and discourage the High Energy Consumers. 

In reality the opposite is happening : I consider consumers using less than 100 units are as LECs and above 100 units as HECs.  

The table below reflects the tariff increase in 2019 as compared to 2018

Tariff slabs	Year 2018-19 (Rs/kwh)	Year 2019-20 (Rs/kwh)	Percent increase
0 to 30 units ( kwh)	3.45	3.70	7.2
30 to 100	4.95	5.20	5.0
100 to 200	6.50	6.75	3.8
Above 200	7.55	7.80	3.3
Fixed charges (for all)	50 +60 +60= 170	60+70+70=200	17.6

[Fixed Charges : First KW connection is lower than additional KWs and an all electric home is provided with 3KW connection.]

Let us analyse what difference it makes to the consumer in different slabs in terms of rupee value

( This includes Fixed charges of the respective years)

Tariff slabs	Year 2018-19 (Rs)	Year 2019-20 (Rs)	Percent increase
Fixed Charges	170.00	200.00	17.60
Up to 30 units	273.50	311.00	13.71
Up to 100 units	620.00	675.00	8.90
Up to 200 units	1270.00	1350.00	6.3
Say  220 units	1421.00	1506.00	6.0

What puzzles me is that 'why CESC is penalizing the  lower strata of population with higher percentage increase in tariff'. In fact the higher end users should have been charged with higher rates of tariff to discourage excess usage of electrical energy.

Thus I see a basically a faulty approach in Policy Making.

    One can easily see the ‘Low Energy Consumer’ is taxed more (13.7%)as compared High Energy Consumer (6.0%), more than double . 

   This gap has widened because the Fixed Charges have been hiked disproportionately. This affects the LEC to shell out higher percentage from his monthly  savings.

    How to remove this anomaly?  

  A fair solution is to fix a %  increase based on the total revenue and work backwards to evenly distribute across all groups.

    As we do not have the data about the distribution of consumer base in different slabs  it is difficult to rework the exact solution. However a model calculation based on 6% increase in revenue is shown in the table below.

Tariff slabs	Year 2018-19 (Rs/kwh)	Suggested (Rs/kwh)	Percent increase
0 to 30 units ( kwh)	3.45	3.65 (3.7)	5.8
30 to 100	4.95	5.25 (5.20)	6.0
100 to 200	6.50	6.90 (6.75)	6.15
Above 200	7.55	8.00 (7.90)	6.0
Fixed charges	50 +60 +60= 170	50+65+65=180  ( 200)	6.0

( figure in the bracket shows CESC’s present rate)

The new rates are not way off from the present rates except the Fixed Charges which is significantly lower, down by 11%.

What difference it makes to the consumer in absolute terms of payment in rupees?

Tariff slabs	Year 2018-19 (Rs)	As per suggested rates	% increase
Fixed Charges	170.00	180	6.0
Up to 30 units	273.50	290	6.2
Up to 100 units	620.00	657	6.0
Up to 200 units	1270.00	1347	6.0
Say  220 units	1421.00	1507	6.0

We can see the impact of tariff revision is uniform across all strata and not very much skewed in favour of the HEC

It is important to see the suggested rates have not altered  the dues from the HEC from the present rates declared but at the same time giving relief to LEC.

Tariff slabs	Year 2019-20 (Rs)	As per suggested rates
Fixed Charges	200.00	180
Up to 30 units	311.00	290
Up to 100 units	675.00	657
Up to 200 units	1350.00	1347
Say  220 units	1506.00	1507

If this does not meet the expected overall revenue,  the percentage increase has to be reworked as 7 or 8 uniformly across all sections and not arbitrarily adjust the numbers without concern for Low Energy Consumers.

The country has to go a long way in numeracy to understand the significance of numbers in decision making.