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When it rains, it pours. Electricity tariff adjustments have been plenty of late, as consumers brace themselves for what promises to be the toughest onslaught ever. The power sector regulator has approved and decided on the authorities’ quarterly adjustment petition – allowing a significant Rs1.55/unit in lieu of Quarterly Tariff Adjustment (QTA) for 2QFY22, with effect from July 1, 2022.

This is on top of the QTA made for 1QFY22 earlier this month, amounting to 57 paisa per unit, already in effect from June 1, 2022. The two quarterly adjustments are to be recovered within three months of effective date. Recall that previously, the QTA were recovered over a span of 12 months – a practice that was rightly changed to smoothen the payment flows in a timely manner.

Also, unlike usual circumstances, where one lapsing QTA was replaced by another one, the net impact was never felt in a big way – this time it will feel different. The previous QTA pertaining to 4QFY21 was a negative adjustment of 99 paisa per unit, which was in effect from February to April 2022. The 3QFY21 QTA is still in effect and will lapse in another two months. But that is a paltry 6 paisa per unit of negative adjustment.

Factor in the now ended Prime Minister Relief package of Rs5/unit, and the impact from previous months starts to look even bigger. That is Rs8/unit higher from April or May 2022. And then the monthly fuel cost adjustments have been on the higher side of late – with the attest FCA amounting to Rs8/unit – highest ever. The previous monthly adjustments averaged Rs4/unit. So, here is another Rs4/unit shock – which may continue for at least another quarter.

And we have not even touched the elephant in the room yet. That is the base tariff revision, which may amount to Rs8/unit from July 2022 onwards. A Rs24/unit sudden jump in power tariffs for any category of consumers, albeit for a quarter, is going to have serious implications, on both the demand and recovery patterns. Could the government have spread some of it over a longer span? May be not. The IMF seems in no mood to let go this time. Brace yourselves.

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