Parameters to be considered for "Reduction in cross subsidies"

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To collect data on “Reduction in Cross Subsidies” in the electricity sector, you need to focus on parameters that capture the extent of cross-subsidization, tariff rationalization progress, and impact on stakeholders. Based on regulatory guidelines and best practices, here are the key parameters:

✅ 1. Cost and Revenue Metrics

  • Average Cost of Supply (ACoS): The overall cost per unit of electricity supplied.
  • Category-wise Cost of Supply (CoS): Cost to serve each consumer category (domestic, agricultural, industrial, commercial).
  • Average Billing Rate (ABR): Actual tariff charged to each category.
  • Gap between ABR and CoS: Indicates the level of cross-subsidy for each category.
    • Formula: Cross Subsidy = (ABR – CoS) / CoS × 100%

✅ 2. Cross-Subsidy Level Indicators

  • Cross Subsidy Surcharge (CSS): Amount levied on open access consumers to compensate for loss of cross-subsidy.
  • % Deviation from ACoS: As per National Tariff Policy, tariffs should be within ±20% of ACoS.
  • Trajectory Compliance: Whether the state follows the reduction trajectory mandated by regulators (e.g., Forum of Regulators).

✅ 3. Tariff Structure and Design

  • Fixed vs. Variable Charges Ratio: Higher fixed charges reduce cross-subsidy distortion.
  • Implementation of Multi-Part Tariffs: Adoption of cost-reflective tariffs (fixed + energy charges).
  • Time-of-Day Tariffs: Helps reduce hidden subsidies.

✅ 4. Consumer Impact Metrics

  • Change in Tariff for Subsidized Categories (e.g., agriculture, residential).
  • Change in Tariff for Cross-Subsidizing Categories (e.g., industrial, commercial).
  • Elasticity of Demand: Impact on consumption patterns due to tariff changes.

✅ 5. Financial Health of DISCOMs

  • Revenue Gap (ARR vs. ACS): Indicates if reduction in cross-subsidy is improving financial viability.
  • Subsidy Support from Government: Direct Benefit Transfer (DBT) vs. tariff-based subsidy.

✅ 6. Policy and Compliance Indicators

  • Adherence to National Tariff Policy (NTP) norms.
  • Regulatory Orders on Cross-Subsidy Reduction.
  • Open Access Migration Trends: Higher open access indicates high cross-subsidy burden.

 


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