MSEDCL has claimed that revenue recovery from consumers has been inadequate to meet these costs and thus has claimed that at existing tariff, including latest applicable FAC, the company would be left with a whopping Rs. 67,644 crores of cumulative revenue gaps. To address this, MSEDCL has sought a tariff increase of 14% for FY24 and a further increase of 11% for FY25 in this tariff petition. With this increase, many have claimed that MSEDCL would have among the highest tariffs in India for majority of the consumer categories in the state. While we recognize the financial distress of the utility, it must also be noted that several of MSEDCL’s claims in the petition are unsubstantiated and had resulted in a considerable and unnecessary rise in revenue requirement for the control period. These claims need to be disallowed and are summarized in Table below and are detailed in our submission attached below:

  Parameter / Details Rs. Cr.
1 Claimed Revenue Gap / Requested Tariff Increase 67,644.0
2 Required reduction in claimed Revenue Gap  
3 Unjustified claim of 'Stabilisation amount' 20,054
4 Disallowance of excess AG consumption claim 23,636
5 Increase in power purchase cost of coming two years to be recovered through FAC on actuals after prudence check 12,120
6 Disallowance of carrying cost 8,734
7 Total reduction in revenue gap 64,544
8 Balance revenue gap 3,100
9 Balanced Revenue Gap as % of revenue in FY 24 and FY 25 1.7%

Additional revenue requirement from tariffs is marginal and thus, tariff increase beyond the existing Average Billing Rate (ABR) along with FAC is not required for MSEDCL. Any further revenue gap in the coming two years should be met with changes in FAC based on actual fuel and power purchase cost increase with due prudence check and any balance gap can be assessed at the end of current control period.

MERC was the first Commission in India which fixed tariffs for the 5 year period in Case No. 322 of 2019. This brought clarity and certainty to consumers while also providing clear signals to MSEDCL to improve performance. This approach should be continued in this mid-term review petition wherein no change in base tariff should be allowed. Any increment beyond that would reduce consumer and investor confidence, reduce MSEDCL performance accountability and be burden on consumers.