A uniform energy tariff and electricity duty should be included under the ambit of GST

• India has a population of about 135 crore people. It is the sixth largest economy in the world with a high growth potential. But this growth potential cannot be achieved without giving equal opportunity to every State.

What are the issues faced

• Low-income States (LIG): low accessibility to credit, low investments, low power availability and accessibility, and high energy costs.
• High-income States (HIS): on the other hand, have a big share in industry and commerce because they are not deprived on the same fronts.
• The six HIS (Maharashtra, Tamil Nadu, Gujarat, Karnataka, Andhra Pradesh and Telangana) together account for 56.4% of factories and 54.3% of the net value added to the country, while their share in population is only 32.3%.
• Whereas the six LIS (Bihar, Jharkhand, U.P., M.P., Odisha, and Rajasthan) access only 15% of total institutional credit and barely 5% of total industrial credit, while their share in population is 43%. These States together receive only 50% credit from their hard-earned savings.
• The maximum benefit of the Atmanirbhar package (₹20 lakh crore) also went to the HIS as they have a higher share in the Industry.
• Of the total consumption of electricity, industry and commerce account for more than 50%.
• Energy India Outlook 2021 concludes: “Electricity prices vary not just among end users, but also between states, where a complex patchwork of different taxes and subsidy regimes can leave consumers in some states paying five times more for their electricity than their counterparts in neighbouring states.”

Solutions in the power sector to attain higher economic growth.

• Eliminate price discrimination in the power sector
• Synchronising all the regional grids will help the transfer of energy (without compromising quality).
• The idea of ‘One Nation, One Grid, One Frequency’ will pave the way for establishing a vibrant electricity market and facilitate the trading of power across regions through the adoption of the ‘one tariff’ policy.
• inclusion of electricity duty under the Goods and Services Tax (GST).
• Apart from uniform cost, the power sector also needs uniformity in electricity duty charged by different States.
• In 2020-21, six States consumed 50% of the total installed capacity of power. Thus, only 32% of the population used 50% of power.
• Contrary to this, six backward States got only 25% of the power though their share of the population is 43%.
• Therefore, it is clear that the substantial proportion of the power cost incurred in HIS is also borne by the LIS which buy those industrial products, as the input cost of power has already been included in the product’s price.
• Further, this situation justifies the fact that the final costs of power consumption are also borne by other States.

Conclusion

• In order to attain higher economic growth, the States should raise the issue of uniform energy tariff and inclusion of electricity duty under the ambit of GST.