Finances of the State Electricity Boards and Tariff Policy

The Five Year Plans have continued giving greater emphasis to the need of power development in the country. The Boards have to find larger amount of resources to finance its future activities. For State Electricity Boards (SEBs) the possible source of finance are budgetary sources of the State and Central Government, loans from financial institutions and the internally generated funds which are retained in the Board. If power sector has to expand, it has to be made viable in the long run and profitable in the short run. Profitability can be ensured by reducing cost and/or by making suitable adjustments in tariff level and its structure. A number of measures have been suggested to reduce the cost. The paper concentrates primarily on pricing aspect of financial management. Various issues related to determination of tariff level and its structure have been discussed in detail. To meet socio-economic needs, an efficient and viable cross-subsidisation policy is advocated.