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Tax and Duty on Electricity bills in India

By on April 22, 2016 with 82 Comments  

We at Bijli Bachao want to help people in India to understand various components of their electricity bill. In our previous articles we covered Energy Charges, Fixed Charges and Connected Load and Fuel Adjustment Charges. With this article we would like to explain Electricity Duty or Tax component that appears on the electricity bills. As the name suggests this component is a Tax component that is applicable on usage of electricity and the amount goes to the state government and not to the Electricity Distribution Company or DISCOM. This amount is applicable as per the policy laid down by the central government (Power Ministry) in Tariff Policy.

Why is Tariff Policy setup?

Government of India has laid down electricity tariff policy to make sure that:

  1. Electricity is available to all consumers at reasonable and competitive rates.
  2. Ensure financial viability of the power sector.
  3. Promote transparency.
  4. Promote competition and efficiency in operations.

What is cross subsidy?

While the cost of supplying electricity to all categories of consumers is same, the tariff charged from them is different. For example, if the average cost of service is Rs 3/unit, the domestic consumer may be charged at Rs 2.5/unit while an industrial consumer may be charged at Rs 3.5/unit. In this case, it is said that the domestic consumers are cross-subsidized by industrial consumers. The concept of cross subsidy has existed since very long time. However, it is now widely recognized that rational and economic pricing of electricity can be one of the major tools for energy conservation. The Government has put mechanism to remove the cross subsidy over a period of time.

Why is Electricity Duty/Tax applied?

As a substitute to cross subsidy the Tariff Policy gives option to State Government to raise resources through mechanism of electricity duty and giving direct subsidy to only needy consumers. This is thought to be a better way of targeting subsidies effectively. Electricity duty is charged at different rates for different categories of consumers. Collection of electricity duty ensures that government is able to manage all finances related to the subsidies that are provided to needy customers for use of electricity.

How is Electricity Duty/Tax Applied?

Electricity duty is charged on consumption and is mostly a rate that is applicable per unit of electricity consumed. So higher the number of units, higher will be the electricity duty amount. In some states it is also applied as percentage of total charges (electricity usage + fixed charges) and in some states both are applicable. So the best way to reduce this amount is to reduce the units consumed per month.  Thus taking energy efficiency measures or energy conservation measures will also reduce the electricity duty amounts on your electricity bills.

How much is the amount of electricity duty/tax?

We at Bijli Bachao are trying to collect this information from various State Governments and we will update the information when we get credible sources. Although we have not got this value from tariff orders from various states, but we have collected this information from electricity bills that we have collected from various users that have been extremely helpful to us by sending their electricity bills. Below is the information for residential electricity connections:

State

Tax Rate (applicable as percent of total bill amount)

Duty Rate (applied as Rs per unit of electricity consumed)

Andhra Pradesh

0

0.06

Arunachal Pradesh

N.A

N.A

Assam

0

0.09

Bihar

0

0.15

Chattisgarh

7

0.1

Goa

N.A

N.A

Gujarat

20

0

Gujarat-Torrent-Ahd

20

0

Gujarat-Torrent-Surat

20

0

Haryana

0

0.1

Himachal Pradesh

N.A

N.A

Jammu and Kashmir

N.A

N.A

Jharkhand

N.A

N.A

Karnataka

5

0

Kerala

7

0

Madhya Pradesh

0

0.63

Maharashtra

15

0

Mumbai-Reliance

15

0.15

Mumbai-Tata

15

0.15

Mumbai-BEST

15

0.15

Manipur

N.A

N.A

Meghalaya

N.A

N.A

Mizoram

N.A

N.A

Nagaland

N.A

N.A

National Capital Region

5

0

Odisha

N.A

N.A

Punjab

13

0.1

Rajasthan

0

0.4

Sikkim

N.A

N.A

Tamil Nadu

N.A

0.1

Tripura

N.A

N.A

Uttar Pradesh

5

0

Uttarakhand

0

0.15

West Bengal

N.A

N.A

Chandigarh

0

0.09

West Bengal-Kolkata-CESC

N.A

N.A

The states in yellow are the ones where we do not have this information. Help us improve this by sending a copy of your latest electricity bill at feedback@bijlibachao.com.

About the Author:
Abhishek Jain is an Alumnus of IIT Bombay with almost 10 years of experience in corporate before starting Bijli Bachao in 2012. His passion for solving problems moved him towards Energy Sector and he is keen to learn about customer behavior towards Energy and find ways to influence the same towards Sustainability. .

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