tariff rationalization meaning
We must also recognise that the energy sector in India is currently structured in an inherently inefficient manner. Designs for tariff rationalization Learn more. The discom can then maximise sales and this will lead to maximum use of generation capacity and gains due to better efficiencies. The power sector in India is at the cusp of an unprecedented transformation, essentially driven by technology. 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. This proposal was also discussed at the state power ministers’ conference in May 2017. Only then would the tariff rationalisation exercise make sense. 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. 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. 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. 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. Over the years, the regulators have been moving towards a rationalisation of the tariff structure. 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. 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. We find that the bilateral tariff reductions had opposing effects on scale. 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. 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. 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. Enhanced focus on efficiency in service delivery through appropriate structural realignments and operational cost optimisation. 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. It would create problems because municipal corporations will find it difficult to recover these costs from their consumers by levying higher water charges. 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. 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. 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. Sector experts share their views on how the tariff structure can be rationalised and the key considerations in doing so…. But within one category, like hospitals, there are different types of consumers – government, municipal and private. Further, this will discipline those who are supplied below-cost power because they know they are being measured. Download Rate Card for Overseas Companies, Your Email (required) Summary of Change. What does rationalization mean? This would, in turn, improve the revenue prospects for the utilities and reduce their losses. ArcticTARIFF is een compleet web-based tariefsysteem voor de douane-administratie overheden in de landen van de Europese Unie (EU). 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. copyrighted © 2021 The Express Tribune. This must change. Rationalization as a defense mechanism is similar to rationalization as a logical fallacy. 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. The Electricity Act, 2003 also clearly outlines the role of the regulators – to stabilise, guide and nurture the sector comprehensively. In a sensible market, prices are related to volume. 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. How would the proposed move impact discoms and consumers? Consumers, therefore, come under the state governments and their regulators. We must ensure that all supply is metered. See more. Rationalization is the reorganization of a company in order to increase its operating efficiency. There could also be a discount for steady and large purchases made consistently. 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. 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. The act, process, or practice of rationalizing. redistributed or derived from. Het systeem is compatibel met de EU-eisen en biedt flexibele en uitgebreide functionaliteit, waardoor ook de nationale regelgeving kan worden toegepast. Also, the situation on the ground varies from state to state. Further, the multiple slabs have created multiple consumer categories and we get a very complex structure, which leads to multiple inefficiencies. One must also bear in mind that in most cases, the regulators in India regulate government owned and managed entities, which itself is challenging. Rationalization The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. The resolution on tariff rationalisation was also adopted at the union and states power minsters’ conference in October 2016, with most of the states agreeing to the idea of having uniform tariff categories of electricity 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 See more. 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. Thus, it is important to have separate tariffs even in the “same” category. Today, for industries, the tariffs are really high. 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. 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. We have been going in the opposite direction, charging more for higher consumption and less (or even free) for the smallest consumers. This has made a heavy capital essential service into a highly uneconomic one, with no surplus generated for regular maintenance and investment. For more information, please see our Comments FAQ. 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. 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. However, for private hospitals that are run on a commercial basis, there cannot be lower tariffs. As soon as consumption crosses 200 units, consumers move into the next slab for which the tariffs are higher. of Pakistan adds subsidies and "tariff Rationalization Surcharge" to make it uniform and notify. This gives a clear message that as you consume more, you have to pay more. (noun) rationalization definition: 1. an attempt to find reasons for behaviour, decisions, etc., especially your own: 2. the process…. In psychology and logic, rationalization or rationalisation (also known as making excuses [according to whom?]) If Indian industries have to compete globally, they cannot be asked to pay the highest tariffs in the world. We have come across many private hospitals registered as charitable trusts and demanding lower rates. In India, the tariffs have been generally distorted. The first thing is that the Ministry of Power (MoP) should not believe that it can run the state discoms remotely from Delhi. 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. However, we believe that the proposed move will not only rationalise the slabs but also align tariffs with the cost of supply. A realistic assessment of costs of service to various consumer categories at different voltage levels of supply and setting cost-reflective retail tariffs. 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. Elimination of cross-subsidy as well as the concept of regulatory assets. We must have tariffs that vary with time of day and night as well as season. Comments are moderated and generally will be posted if they are on-topic and not abusive. 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 For example, in Chhattisgarh, we have a separate tariff category for mining; however, such a category may not be relevant in other states. 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. 173 Size Rationalization and Trade Exposure Of course elasticity effects are not the only possible effect of increased for- eign competition. The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. There appear to be some misperceptions about the, recent tariff rationalisation of electricity. Rationalising is always a good and an attractive concept, but the problem is that you have a telescopic system of charging. 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. Tariff: A tariff is a tax imposed on imported goods and services. 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. 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. 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. This, along with the gradual reduction in cross-subsidies, would encourage industrial and commercial consumers to increase their power consumption from discoms, rather than opting for supply under open access. India’s current consumer tariff structure is a highly complex one, characterised by numerous categories and tariff slabs across various states. 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. 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 aim here is to complet… The proposed move to reduce slabs would certainly reduce the administrative burden for both utilities as well as consumers. The minimisation of the gap between the ACS and the average revenue realised will address the issue of accumulated losses and higher debt. Since government and municipal hospitals cater to socially and economically disadvantaged patients, their tariffs are kept low. 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. 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. This requires complicated accounting and is not the business of the discom. If a large category like agriculture is not metered, the AT&C numbers will not be reliable. What is tariff rationalization? Today, the entire burden of cross-subsidising agriculture finally falls on industrial and commercial users. In sociology, rationalization (or rationalisation) is the replacement of traditions, values, and emotions as motivators for behavior in society with concepts based on rationality and reason.For example, the implementation of bureaucracies in government is a kind of rationalization, as is the construction of high-efficiency living spaces in architecture and urban planning. 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. 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. 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 doing so, it must also ensure sectoral development and business viability. Nevertheless, scope remains for the liberalization and rationalization of tariffs in non-agricultural goods, particularly for the removal of tariff bias, tariff escalation and tariff peaks affecting developing country exports in their major markets. For example, for domestic consumers, there is a slab for those who consume only 100-200 units. Factory organization is often rationalized to make it as efficient as possible. The SERCs should also provide a roadmap to reduce cross-subsidies with the objective of keeping tariffs across categories within 80 per cent to 120 per cent of the average cost of supply (ACS) of a distribution utility. 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. Unless otherwise stated, all content is 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. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples Political economy of state-owned utilities needs to be acknowledged and viable political solutions need to be found. Against this backdrop, the importance of this issue cannot be less emphasised. Elimination of cross-subsidy as well as the concept of regulatory assets. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples Tariff rationalization is especially important in promoting the competitiveness of domestic industries. “Two-part tariffs featuring separate fixed and variable charges and Time differentiated tariff shall be Too many tariff slabs, which may not necessarily reflect the cost of supply, lead to much higher administrative costs for monitoring consumers. 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. This document dated June 1999 is provided for the ADB project TA2633 in Indonesia. Further, the complexity may prevent consumers from fully responding to tariffs due to the high cost of processing the price information. However, such high tariffs based on connected load are not feasible for other categories such as public drinking water supply schemes. The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. …. 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. He asked to remove tariff anomalies in tariff structure through analysis of value chains. 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