Mr. P. Abraham, on the role of governments, said that traditionally power tariffs were low primarily because of state policies. But despite all their inefficiencies, up to the 1980’s many SEBs earned at least 3% on assets or even more. MSEB was earning around 4-5%. In contrast, government has given NTPC a share capital of Rs. 8000 crores on which interest is not charged. The dividend does not match the cost of that capital. The Regulatory Commissions (RC) where established are in some cases bringing in commercial attitudes. All utilities have to improve their commercial and efficiency norms. But the Governemnt of India (GOI) will have to share in a substantial manner, at least in the initial stages of reform, in the losses of SEB’s due to social programmes. Governments are diverting social expenditures to power subsidies. States are doing a great deal to mobilize resources. But the Centre cannot put the full burden of the costs of industrialization on the state governments alone. For example, the entire agricultural sector is subsidized by them. Power has to be made affordable for the agricultural sector. It is the duty of the GOI to ensure that the power sector is taken care of and not treated as a sector to be supported only by the states. Support need not be only in the form of cash subsidies but could be in the form of incentives. But despite subsidies and incentives, tariffs are bound to increase in the future. Mr S L Rao concluded that while the governments at the centre and the state levels have many responsibilities, power being a concurrent subject, the centre cannot distance itself from the responsibilities of sharing the costs. Government needs revenues and there are limits to taxation. The central govt has to share some of the burden with the states.
Fuels: Mr. O N Marwah said that taxation is used as a revenue tool by various govts and state govts are using fuel as the cash cow to give more and more milk, because they find that this is an area that they can tax heavily, with rising revenues as prices of fuels keep rising. Power sector finds petro-fuels expensive because they cannot recover the costs in the final tariff. The impact of taxation on naptha, levied by the central and state govts comes to a maximum level of 30-32% of the fuel cost and for furnace oil (FO) it is 30-35% of the fuel cost. The price for FO is based on the concept of cost to product import parity in the country. We refine 30% of oil from crude oil and the remaining 70% is imported. The crude oil attracts customs duty of 10% + excise duty of 16% which is levied on the refining process in the country. In addition there is sales tax levied by state govts. The total impact comes to around Rs5480 in case of naptha and Rs5600 in case of FO. The price is related to import parity of the fuel oil. The CIF value of naptha is $ 219/ton and FO is $ 154/ton (appx.). Based on these prices at which the fuels are imported, the indigenous price is fixed by the oil companies. The CIF value is Rs. 10,900 for naptha and Rs. 7700 for FO. On