Cost-reflective tariffs will provide the appropriate price signals to both consumers and utilities and reduce the distortions. The proposed move to reduce slabs would certainly reduce the administrative burden for both utilities as well as consumers. 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 This gives a clear message that as you consume more, you have to pay more. The aim here is to complet… Elimination of cross-subsidy as well as the concept of regulatory assets. 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. In India, the tariffs have been generally distorted. Another issue relates to high tension consumers, that is, consumers with consumption of 1 MW and above, who are the real revenue generators. 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. What is tariff rationalization? But within one category, like hospitals, there are different types of consumers – government, municipal and private. What, according to you, should be the key considerations of regulators while rationalising the tariff structure? 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. rationalization definition: 1. an attempt to find reasons for behaviour, decisions, etc., especially your own: 2. the process…. 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. World over, including in India, the regulator is expected to take a neutral position, balancing the interests of all stakeholders. Rationalization means organizing something into a logically coherent system. 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. 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. TV) (Tariff Agreement, July 2, 1997, Protection From Rationalization Measures, Termination of Employment, and Income Protection (Protection Agreement)). This proposal was also discussed at the state power ministers’ conference in May 2017. 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. Since government and municipal hospitals cater to socially and economically disadvantaged patients,  their tariffs are kept low. Ensuring high reliability and standards of service. 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. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples Today, for industries, the tariffs are really high. one tariff line will affect other industries. We must ensure that all supply is metered. Today, the entire burden of cross-subsidising agriculture finally falls on industrial and commercial users. 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. 173 Size Rationalization and Trade Exposure Of course elasticity effects are not the only possible effect of increased for- eign competition. Enhanced focus on efficiency in service delivery through appropriate structural realignments and operational cost optimisation. Tariff rationalisation: myth and reality. This sort of reorganization may lead to an expansion or reduction in … The discom must not be asked to cross-subsidise one consumer or group by charging more from the larger consumer. Electricity was in short supply and ensuring that the marginalised people got it regularly was an unsuccessful effort. Sector experts share their views on how the tariff structure can be rationalised and the key considerations in doing so…. It will also augur well for the country in terms of ensuring long-term energy security and a clean, sustainable environment. 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. 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. 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 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. Comments are moderated and generally will be posted if they are on-topic and not abusive. This is a long-pending need of the sector and is clearly emphasised in the National Tariff Policy. The act, process, or practice of rationalizing. One must also bear in mind that in most cases, the regulators in India regulate government owned and managed entities, which itself is challenging. While fixing tariffs, the regulator must consider these aspects. Trade reforms that amount to tariff reductions or real cur- rency appreciation may act mainly to reduce domestic demand for import- competing products. tariff definition: 1. a charge or list of charges either for services or on goods entering a country 2. a charge or…. A realistic assessment of costs of service to various consumer categories at different voltage levels of supply and setting cost-reflective retail tariffs. 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. We must also recognise that the energy sector in India is currently structured in an inherently inefficient manner. If Indian industries have to compete globally, they cannot be asked to pay the highest tariffs in the world. 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. This material may not be published, broadcast, rewritten, Tariff rationalization is especially important in promoting the competitiveness of domestic industries. Unfortunately, electricity is a concurrent subject in our Constitution. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. redistributed or derived from. However, such high tariffs based on connected load are not feasible for other categories such as public drinking water supply schemes. 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. Further, the complexity may prevent consumers from fully responding to tariffs due to the high cost of processing the price information. 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. 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. A common template for industries and commercial users may be possible across the states. We find that the bilateral tariff reductions had opposing effects on scale. 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. The minimisation of the gap between the ACS and the average revenue realised will address the issue of accumulated losses and higher debt. Learn more. Unless otherwise stated, all content is Tariff rationalisation would bring in greater transparency for consumers and provide better control on operations for discoms. 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 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. In real life, they cater to only affluent patients and the quotas for poor patients are never met. Het systeem is compatibel met de EU-eisen en biedt flexibele en uitgebreide functionaliteit, waardoor ook de nationale regelgeving kan worden toegepast. 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. Tariff definition is - a schedule of duties imposed by a government on imported or in some countries exported goods. 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. However, for private hospitals that are run on a commercial basis, there cannot be lower tariffs. Encouraging the adoption of advanced technologies at various levels through an appropriate regulatory framework and market structure. The power sector in India is at the cusp of an unprecedented transformation, essentially driven by technology. 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. “Two-part tariffs featuring separate fixed and variable charges and Time differentiated tariff shall be Another issue is that supply to agriculture is not metered. Phone Number (noun) 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. 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. 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. 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. Further, the multiple slabs have created multiple consumer categories and we get a very complex structure, which leads to multiple inefficiencies. This also gives a clear signal to consumers that they should save energy and opt for five-star-rated appliances. Learn more. The discom can then maximise sales and this will lead to maximum use of generation capacity and gains due to better efficiencies. 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. 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. 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. countries, which have undertaken programmes of structural reform, tariff rationalization and trade liberalization, was faster than the others. 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. 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. Summary of Change. This requires complicated accounting and is not the business of the discom. of Pakistan adds subsidies and "tariff Rationalization Surcharge" to make it uniform and notify. Rationalization The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. 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. This is the time to make price lists more sensible. It would create problems because municipal corporations will find it difficult to recover these costs from their consumers by levying higher water charges. We must have tariffs that vary with time of day and night as well as season. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples What does rationalization mean? For example, in Chhattisgarh, we have a separate tariff category for mining; however, such a category may not be relevant in other states. Against this backdrop, the importance of this issue cannot be less emphasised. Rationalization The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. 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. For example, for domestic consumers, there is a slab for those who consume only 100-200 units. Such developments would have a widespread impact in the long run for all stakeholders. Lowering of retail tariffs through efficiency and realignment of the generation mix. As soon as consumption crosses 200 units, consumers move into the next slab for which the tariffs are higher. Tariff: A tariff is a tax imposed on imported goods and services. Further, this will discipline those who are supplied below-cost power because they know they are being measured. See more. This revision implements increases to pay schedules, to “dynamic supplements,” and the adjusted date for terminating these pay schedules in accordance with Tariff Agreement 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. In a sensible market, prices are related to volume. 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. Elimination of cross-subsidy as well as the concept of regulatory assets. 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. The Electricity Act, 2003 also clearly outlines the role of the regulators – to stabilise, guide and nurture the sector comprehensively. 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. There could also be a discount for steady and large purchases made consistently. 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. India’s current consumer tariff structure is a highly complex one, characterised by numerous categories and tariff slabs across various states. Tariff Subsidy and Surcharge NEPRA Determined Tariff Subsidy and Surcharge NEPRA Determined Tariff … Please leave this field empty. 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. There appear to be some misperceptions about the, recent tariff rationalisation of electricity. 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. ArcticTARIFF is een compleet web-based tariefsysteem voor de douane-administratie overheden in de landen van de Europese Unie (EU). Please leave this field empty. Rationalize definition, to ascribe (one's acts, opinions, etc.) Rationalization is one of the most common defense mechanisms. Only then would the tariff rationalisation exercise make sense. 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. 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. A tariff is a tax imposed by a government on imports or exports of goods. We have a high level of cross-subsidy in tariffs, ToD tariffs are not widely adopted and in general, incentives for efficient performance (both on the supply and the demand side) are absent, with only a few exceptions. 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. See more. 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. 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. We have been going in the opposite direction, charging more for higher consumption and less (or even free) for the smallest consumers. While doing so, it must also ensure sectoral development and business viability. 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. The Meaning of Rationalization in Psychology Explained With Examples. Download Rate Card for Overseas Companies, Your Email (required) 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. Factory organization is often rationalized to make it as efficient as possible. The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. Rationalization is the reorganization of a company in order to increase its operating efficiency. 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. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. We have come across many private hospitals registered as charitable trusts and demanding lower rates. 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. copyrighted © 2021 The Express Tribune. If a large category like agriculture is not metered, the AT&C numbers will not be reliable. How would the proposed move impact discoms and consumers? Tariff Rationalization ... NTP (8.4 Definition of tariff components and their applicability) envisages explicitly the emphasis on the ToD Tariff. This is so because industries have to cross-subsidise agriculture. The first thing is that the Ministry of Power (MoP) should not believe that it can run the state discoms remotely from Delhi. The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. 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. Consumers, therefore, come under the state governments and their regulators. Designs for tariff rationalization Too many tariff slabs, which may not necessarily reflect the cost of supply, lead to much higher administrative costs for monitoring consumers. Political economy of state-owned utilities needs to be acknowledged and viable political solutions need to be found. Govt. Further, there is inconsistency in the categorisation of certain consumer segments across states. 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. 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. …. 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. Thus, it is important to have separate tariffs even in the “same” category. 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. This must change. 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. 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. 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. We talk about how the percentage of AT&C losses has come down, but in reality we find that the numbers keep fluctuating. When we talk of tariff rationalisation, this is the real issue. 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. Tariff definition, an official list or table showing the duties or customs imposed by a government on imports or exports. If this sounds familiar, it may be time to look at SKU rationalization in your business. Over the years, the regulators have been moving towards a rationalisation of the tariff structure. 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. However, we believe that the proposed move will not only rationalise the slabs but also align tariffs with the cost of supply. 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. This document dated June 1999 is provided for the ADB project TA2633 in Indonesia. 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. For more information, please see our Comments FAQ. In psychology and logic, rationalization or rationalisation (also known as making excuses [according to whom?]) This has made a heavy capital essential service into a highly uneconomic one, with no surplus generated for regular maintenance and investment. 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. This would, in turn, improve the revenue prospects for the utilities and reduce their losses. We now have a situation where there is plenty of electricity and more is to come. 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 $1.4 billion to individual investors. Rationalisation cannot be done to the extent that it is being talked about. He asked to remove tariff anomalies in tariff structure through analysis of value chains. The role of discoms as well as consumers would change unbelievably with neither the discoms remaining the sole source of power supply to end-users nor consumers being just consumers. TA 2633-: Electricity Tariff Rationalization Study; Technical Assistance Special Fund: US$ 353.00 million Approval: 27 Aug 1996: Project Data Sheets (PDS) contain summary information on the project or program. Rationalization as a defense mechanism is similar to rationalization as a logical fallacy. 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. Also, the situation on the ground varies from state to state. 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Structure, which partly cover for the ADB project TA2633 in Indonesia organization is often rationalized to make lists. Rationalized to make the company more efficient reasons for behaviour, decisions etc.... Like hospitals, there is a concurrent subject in our Constitution, tariffs! Defense mechanisms views on how the tariff rationalisation would bring in greater transparency for consumers and provide control.

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