From the consumer perspective, the rationalisation and simplification of the tariff/slab structure would enable transparency, better compliance and reliable power supply, and may well yield consumption. While tariff rationalisation is an important reform for the sector, the financial sustainability of the distribution segment is also dependent on the ability of the discoms to reduce their distribution losses and on timely and cost-reflective tariff revisions by the SERCs. Further, the multiple slabs have created multiple consumer categories and we get a very complex structure, which leads to multiple inefficiencies. This material may not be published, broadcast, rewritten, Political economy of state-owned utilities needs to be acknowledged and viable political solutions need to be found. Tariff structuring should also aim at addressing areas like smoothening the demand curve (through time-of-day [ToD] metering) and putting in place a framework of penalties for erring consumers, with incentives for law-abiding/punctual consumers. …. There appear to be some misperceptions about the, recent tariff rationalisation of electricity. See more. Rationalization is the reorganization of a company in order to increase its operating efficiency. It is well to remember that when rationalising, there will always be political and economic considerations, resulting in the introduction of new categories or redefining older ones. The key considerations for tariff rationalisation could include: A realistic assessment of costs of service to various consumer categories at different voltage levels of supply and setting cost-reflective retail tariffs. Please leave this field empty. If a large category like agriculture is not metered, the AT&C numbers will not be reliable. The power sector in India is at the cusp of an unprecedented transformation, essentially driven by technology. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples Only then would the tariff rationalisation exercise make sense. In our view, the considerations for regulators while rationalising the tariff structure should be four-pronged: the tariff should aim at the recovery of prudent cost; subsidy to the needy should be well targeted and allocated; the tariff should progressively reflect the ACS; and there should be a simplification of tariffs and slab structures. It will also augur well for the country in terms of ensuring long-term energy security and a clean, sustainable environment. Tariff rationalization is especially important in promoting the competitiveness of domestic industries. Cost-reflective tariffs will provide the appropriate price signals to both consumers and utilities and reduce the distortions. If we take out the assured returns on deployed equity and the taxation components, there is hardly any room left for the regulator for tariff manoeuvring. This is in view of the complex tariff structure across the states with multiple categories and subcategories and a high level of cross-subsidisation by industrial and commercial consumers. 173 Size Rationalization and Trade Exposure Of course elasticity effects are not the only possible effect of increased for- eign competition. Tariff rationalisation would possibly do away with high tariffs and cross-subsidisation by the commercial/industrial segments, which partly cover for the unbilled power/commercial losses. tariff definition: 1. a charge or list of charges either for services or on goods entering a country 2. a charge or…. Elimination of cross-subsidy as well as the concept of regulatory assets. Global fluctuation: Price of petrol likely to go down, Fuel price adjustments: NEPRA reduces power tariff by 35 paisa, Inflation hits highest level in 16 months. It would be the prime responsibility of the regulator to prepare the sector, mainly consumers, for embracing the expected changes, be it on account of rolling out of smart grids and smart meters, increasing penetration of renewable technologies, net metering and energy storage solutions, substitution of fossil and petroleum fuels in transportation or domestic cooking by electricity. For example, for domestic consumers, there is a slab for those who consume only 100-200 units. Further, the complexity may prevent consumers from fully responding to tariffs due to the high cost of processing the price information. The central government is in discussion with the state governments to rationalise the tariff structure for distribution utilities by reducing the number of tariff categories. Tariffs could also be varied over distance so that the cost of supplying to distant consumers does not have to be subsidised by closer ones. Comments are moderated and generally will be posted if they are on-topic and not abusive. As soon as consumption crosses 200 units, consumers move into the next slab for which the tariffs are higher. Rationalization The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. It would create problems because municipal corporations will find it difficult to recover these costs from their consumers by levying higher water charges. This sort of reorganization may lead to an expansion or reduction in … Rationalize definition, to ascribe (one's acts, opinions, etc.) Tariff: A tariff is a tax imposed on imported goods and services. This also gives a clear signal to consumers that they should save energy and opt for five-star-rated appliances. This revision implements increases to pay schedules, to “dynamic supplements,” and the adjusted date for terminating these pay schedules in accordance with Tariff Agreement While rationalising the tariff structure is an attractive idea, we will have to live with the reality that each state follows a tariff structure that is more conveniently suited for its social objectives. Tariff rationalisation would bring in greater transparency for consumers and provide better control on operations for discoms. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. Commercial users can at least pass on a part of the higher cost to their consumers, although the alarming rate of closure of newly constructed malls and commercial complexes suggests that there is a limit to which such a burden can be borne by this class of users. Tariff rationalisation is reorganisation of the tariff structure in a way that economy can decide which goods should be necessarily be imported or exported in order to increase productivity of the economy and taking the decisions about the tariffs which are involved while importing and exporting goods. Too many tariff slabs, which may not necessarily reflect the cost of supply, lead to much higher administrative costs for monitoring consumers. Rationalization definition is - the act, process, or result of rationalizing : a way of describing, interpreting, or explaining something (such as bad behavior) that makes it seem proper, more attractive, etc.. How to use rationalization in a sentence. The discom must not be asked to cross-subsidise one consumer or group by charging more from the larger consumer. There is also a case for subvention in tariffs by way of targeted subsidies to the needy, by the respective state government, but the same should be paid timely which, otherwise, leads to cash flow issues with the utilities. This would, in turn, improve the revenue prospects for the utilities and reduce their losses. According to [...], Falling tariffs and capacity growth augur well for segment, Industrial and commercial users turn to short-term power market, “Significant potential for thin-film deployment”, TSERC notifies draft DSM Regulations, 2020, PFC to sell bonds worth $1.4 billion to individual investors. Rationalization as a defense mechanism is similar to rationalization as a logical fallacy. This is the time to make price lists more sensible. From the discom perspective, tariff rationalisation will aid in improving discom financials, which are currently riddled with losses, high debt levels with adverse capital structures and weak debt coverage indicators. “Two-part tariffs featuring separate fixed and variable charges and Time differentiated tariff shall be Such developments would have a widespread impact in the long run for all stakeholders. to causes that superficially seem reasonable and valid but that actually are unrelated to the true, possibly unconscious and often less creditable or agreeable causes. What is tariff rationalization? The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. Rationalisation cannot be done to the extent that it is being talked about. Retail tariff patterns are also likely to see appreciable variations in the coming years, with tariffs going up in the short to medium term but settling to really low levels in the longer run. Against this backdrop, the importance of this issue cannot be less emphasised. India’s current consumer tariff structure is a highly complex one, characterised by numerous categories and tariff slabs across various states. We talk about how the percentage of AT&C losses has come down, but in reality we find that the numbers keep fluctuating. In India, the tariffs have been generally distorted. Your Company Name, Wind power development in the country started in 1986, with the setting up of the first wind, A growing number of industrial and commercial consumers, who had long been reeling under high utility tariffs, US-based solar module manufacturer First Solar entered the Indian market in 2010 and has since become one, The Telangana State Electricity Regulatory Commission (TSERC) has notified draft TSERC (Deviation Settlement Mechanism and related matters) [...], Power Finance Corporation (PFC) plans to sell bonds worth $1.4 billion to individual investors. What does rationalization mean? How would the proposed move impact discoms and consumers? Download Rate Card for Overseas Companies, Your Email (required) However, for private hospitals that are run on a commercial basis, there cannot be lower tariffs. While fixing tariffs, the regulator must consider these aspects. In real life, tariffs are a state subject and the regulators will be guided by what the political powers in the states want them to do. What is encouraging the government to go in for tariff rationalization is the response to the Thai and Japan offers which offered a discounted tariff rate. Designs for tariff rationalization Trade reforms that amount to tariff reductions or real cur- rency appreciation may act mainly to reduce domestic demand for import- competing products. This proposal was also discussed at the state power ministers’ conference in May 2017. However, such high tariffs based on connected load are not feasible for other categories such as public drinking water supply schemes. In a sensible market, prices are related to volume. The first thing is that the Ministry of Power (MoP) should not believe that it can run the state discoms remotely from Delhi. Also, the National Tariff Policy calls for a progressive revision in tariffs for judicious recovery of the cost of service such that cross-subsidy is reduced and is within +/- 20 per cent of ACS. He asked to remove tariff anomalies in tariff structure through analysis of value chains. (Note: Arun Srivastava’s views are his personal views as a power professional and may not necessarily be aligned to Tata Power’s views.). I'm doing an essay on electricity infrastructure reforms in India and I seriously cannot find a definition for this at least over the internet... just talk about how important it is in balancing subsidy costs or how people hate it. We find that the bilateral tariff reductions had opposing effects on scale. During the last decade, all the 20 fastest export-growth economies have reduced import tariffs, while in Pakistan the trend has been the opposite with an increase of 11% in import tariffs1. Also, the situation on the ground varies from state to state. one tariff line will affect other industries. A tariff is a tax imposed by a government on imports or exports of goods. Thus, it is important to have separate tariffs even in the “same” category. Lowering of retail tariffs through efficiency and realignment of the generation mix. Rationalization is one of the most common defense mechanisms. There are five main types of tariffs, protective, prohibitive, specific, ad valorem, and revenue:– Protective Tariff: used to push up the price of imported products as a protective measure against foreign competition, i.e. Since government and municipal hospitals cater to socially and economically disadvantaged patients, their tariffs are kept low. While doing so, it must also ensure sectoral development and business viability. redistributed or derived from. When we talk of tariff rationalisation, this is the real issue. TV) (Tariff Agreement, July 2, 1997, Protection From Rationalization Measures, Termination of Employment, and Income Protection (Protection Agreement)). copyrighted © 2021 The Express Tribune. is a defense mechanism in which controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation, and are made consciously tolerable—or even admirable and superior—by plausible means. Learn more. It is also emerging from growing malpractices in the tourism sector of guests being kept in poor quality accommodations like private homes, being given poor food and undercutting of tariff rates by tour operators. The basic rationale in tariff design has to be to reflect the cost of service each consumer category and at the same time provide reasonable returns to the utility and incentivise efficient performance. However, we believe that the proposed move will not only rationalise the slabs but also align tariffs with the cost of supply. If this sounds familiar, it may be time to look at SKU rationalization in your business. He stated that the Ministry is in the process of preparing three years of tariff rationalization plans for different sectors with the aim to reduce the cost of production through reduction of duties. Tariff definition, an official list or table showing the duties or customs imposed by a government on imports or exports. If Indian industries have to compete globally, they cannot be asked to pay the highest tariffs in the world. At its most basic meaning, SKU rationalization is the process of deciding which products to keep (or improve) and which ones to discontinue — all with the goal of improving your organization’s bottom line. In real life, they cater to only affluent patients and the quotas for poor patients are never met. Another key issue that must be taken into account before rationalising tariffs is that discoms should adopt advanced meter reading or automatic meter reading and eliminate the involvement of any human element. Govt. He further stated that necessary tariff protection to the local industry is vital for investment in the country, however, it is also imperative to protect the downstream industry. A common template for industries and commercial users may be possible across the states. Elimination of cross-subsidy as well as the concept of regulatory assets. During the six years following the Free Trade Agreement with the United States, Canadian manufacturing exhibited substantial rationalization – a decline in the number of plants accompanied by increases in output per plant. of Pakistan adds subsidies and "tariff Rationalization Surcharge" to make it uniform and notify. The minimisation of the gap between the ACS and the average revenue realised will address the issue of accumulated losses and higher debt. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. We must have tariffs that vary with time of day and night as well as season. countries, which have undertaken programmes of structural reform, tariff rationalization and trade liberalization, was faster than the others. Het systeem is compatibel met de EU-eisen en biedt flexibele en uitgebreide functionaliteit, waardoor ook de nationale regelgeving kan worden toegepast. 5 • Recognition of the national interest in tariff reform is critical in order to avoid the folly of entering multilateral, regional and bilateral trade negotiations with the false view of tariff A realistic assessment of costs of service to various consumer categories at different voltage levels of supply and setting cost-reflective retail tariffs. Factory organization is often rationalized to make it as efficient as possible. The proposed move to reduce slabs would certainly reduce the administrative burden for both utilities as well as consumers. STRATEGY OF TARIFF RATIONALIZATION 16 CHAPTER 5 RATIONALIZATION OF DOMESTIC TAXES 18 CHAPTER 6 USE OF OTHER INSTRUMENTS 20 6.1 Import Margin Requirements 20 6.2 Exchange Rate Policy 22 6.3 Use of Tariff Quotas 23 6.4 Some Concerns 24 CHAPTER 7 INSTITUTIONS AND LAWS 25 7.1 Safeguards 25 7.2 Anti -Dumping 29 7.3 Special Provisions 31 Rationalization means organizing something into a logically coherent system. We must ensure that all supply is metered. Enhanced focus on efficiency in service delivery through appropriate structural realignments and operational cost optimisation. With a view to simplifying electricity tariffs, the power ministry recently constituted a committee for developing a framework for the creation of tariff categories that enable uniform and homogeneous electricity tariff categorisation across the country. Further, there is inconsistency in the categorisation of certain consumer segments across states. Rationalisation of tariffs will enhance efficiency, stop complicated and inefficient accounting cross-subsidies, ensure demand consistency through the year, improve capacity utilisation in generation and even distribution, and benefit the steady buyer. This requires complicated accounting and is not the business of the discom. This is so because industries have to cross-subsidise agriculture. We now have a situation where there is plenty of electricity and more is to come. (noun) Further, this will discipline those who are supplied below-cost power because they know they are being measured. The Electricity Act, 2003 also clearly outlines the role of the regulators – to stabilise, guide and nurture the sector comprehensively. As per the survey, the current tariff structure in most of the power distribution companies is complex with myriad rates/categories for different types of consumer classes. The Economic Survey 2015-16 had suggested simplification of power tariffs with no more than two to three tariff categories, which would improve transparency and collection efficiency along with governance benefits. Electricity was in short supply and ensuring that the marginalised people got it regularly was an unsuccessful effort. Over the years, the regulators have been moving towards a rationalisation of the tariff structure. Learn more. There could also be a discount for steady and large purchases made consistently. Today, for industries, the tariffs are really high. Sector experts share their views on how the tariff structure can be rationalised and the key considerations in doing so…. In psychology and logic, rationalization or rationalisation (also known as making excuses [according to whom?]) The act, process, or practice of rationalizing. Timely tariff revisions will go a long way in addressing the revenue gap faced by the utilities, which is prudently allowed by the regulator by way of tariff revisions/creation of regulatory assets. Technical assistance completion reports describe for technical assistance projects the expected impact, outcome and outputs; conduct of activities; evaluation and achievement of the expected outcomes; an assessment and rating; major lessons; and recommendations and follow-up actions. Such signals are essential triggers for new technological shifts and investment requirements, besides preparing consumers for changed service standards/conditions and the likely associated costs. We have been going in the opposite direction, charging more for higher consumption and less (or even free) for the smallest consumers. We must also recognise that the energy sector in India is currently structured in an inherently inefficient manner. Unless otherwise stated, all content is A vast majority, if not all, consumers would also turn into generators of some scale and size, reducing their dependence on discoms to only a fraction of their total power requirement. This document dated June 1999 is provided for the ADB project TA2633 in Indonesia. For example, in Chhattisgarh, we have a separate tariff category for mining; however, such a category may not be relevant in other states. Phone Number This has made a heavy capital essential service into a highly uneconomic one, with no surplus generated for regular maintenance and investment. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples If a particular consumer or group or industry is to be favoured and supplied free or below-cost electricity, we must identify each such consumer and know how much electricity is to be supplied at those lower rates (or free), and the government must reimburse the discom without delay. World over, including in India, the regulator is expected to take a neutral position, balancing the interests of all stakeholders. A key issue is how to reduce aggregate technical and commercial (AT&C) losses, for which the most important requirement is to have 100 per cent metering. The aim here is to complet… In a country like India, where momentous changes are taking place in the sector, in terms of service provisions and costs as well as the technological shifts, the role of the regulator assumes greater importance. ArcticTARIFF is een compleet web-based tariefsysteem voor de douane-administratie overheden in de landen van de Europese Unie (EU). One must also bear in mind that in most cases, the regulators in India regulate government owned and managed entities, which itself is challenging. The Delhi Electricity Regulatory Commission issued an approach paper on tariff rationalization last month.In the paper, DERC examines the existing regulatory framework for the electricity retail tariff and develops a strategy for creating competition in the market. The discom can then maximise sales and this will lead to maximum use of generation capacity and gains due to better efficiencies. Encouraging the adoption of advanced technologies at various levels through an appropriate regulatory framework and market structure. the purpose is to help domestic suppliers compete more effectively in the home market.– Prohibitive Tariff: the tax is so high that it makes an import far too (prohibitively) expensive. While rationalising the tariff structure, the state electricity regulatory commissions (SERCs) should take into consideration the cost structure of the utilities including their fixed cost obligation, payment capabilities of various consumer categories and competition from open access power sellers. Almost 70 per cent of the cost of delivered electricity is on account of fuel costs and is completely outside the purview of the regulator. The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. The Meaning of Rationalization in Psychology Explained With Examples. Tariff Subsidy and Surcharge NEPRA Determined Tariff Subsidy and Surcharge NEPRA Determined Tariff … In the next decade or so, not only would the nature of businesses within the sector undergo major changes, but the electricity market would perforce get aligned with the new realities. Another issue is that supply to agriculture is not metered. What, according to you, should be the key considerations of regulators while rationalising the tariff structure? Tariff rationalisation: myth and reality. He further directed Tariff Policy Centre, National Tariff Commission to conduct detailed studies and suggest three years tariff rationalization roadmap initially for Iron and Steel, Plastics, Engineering, Pharmaceuticals, Chemicals and Textile sectors. The key considerations for tariff rationalisation could include: However, one must realise that, notwithstanding the electricity commissions, the government still has significant regulatory roles and responsibilities. Ensuring high reliability and standards of service. See more. Objectives for rationalization Based on this understanding of the problem, the following objectives for rationalization are implied, all of which are consistent with the New Trade Policy. Even though a metering system has been introduced for agriculture, in many states it is not effective and as a result, there is a very large percentage of consumers that are not metered at all. Here, we shed light on the meaning of rationalization, and put forth some examples of the concept to make it easier for you to get well-versed with it. Tariff setting is one of the key responsibilities of the regulator and that is an important tool to ensure business viability, stakeholder protection and well-being and also for sending out the right signals for the future. This gives a clear message that as you consume more, you have to pay more. Tariff Rationalization ... NTP (8.4 Definition of tariff components and their applicability) envisages explicitly the emphasis on the ToD Tariff. The role of discoms as well as consumers would change unbelievably with neither the discoms remaining the sole source of power supply to end-users nor consumers being just consumers. Today, the entire burden of cross-subsidising agriculture finally falls on industrial and commercial users. No doubt state regulators need to periodically undertake the exercise to reduce the number of categories, as having too many categories creates its own problems. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. TA 2633-: Electricity Tariff Rationalization Study; Technical Assistance Special Fund: US$ 353.00 million Approval: 27 Aug 1996: Project Data Sheets (PDS) contain summary information on the project or program. Rationalization definition is - the act, process, or result of rationalizing : a way of describing, interpreting, or explaining something (such as bad behavior) that makes it seem proper, more attractive, etc.. How to use rationalization in a sentence. Unfortunately, electricity is a concurrent subject in our Constitution. It involves attempting to justify an event or action that doesn't make sense, or that is known to be harmful by describing the event or action as the result of a plausible system or chain of events. Summary of Change. This is a long-pending need of the sector and is clearly emphasised in the National Tariff Policy. Consumers, therefore, come under the state governments and their regulators. The effectiveness of the regulatory system would depend on the convergence of approaches between these two sets of regulators. He said rationalization of electricity tariff to promote businesses in the country especially in wake of current difficulties being faced due to COVID-19, was need of the hour adding that the government was keen to take necessary steps in consultation and cooperation of the IPPs.
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