Tariff rationalization is especially important in promoting the competitiveness of domestic industries. 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. Cost-reflective tariffs will provide the appropriate price signals to both consumers and utilities and reduce the distortions. The discom must not be asked to cross-subsidise one consumer or group by charging more from the larger consumer. Over the years, the regulators have been moving towards a rationalisation of the tariff structure. Rationalization The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. 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. This has made a heavy capital essential service into a highly uneconomic one, with no surplus generated for regular maintenance and investment. Summary of Change. The minimisation of the gap between the ACS and the average revenue realised will address the issue of accumulated losses and higher debt. 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. 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. See more. 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. Thus, it is important to have separate tariffs even in the “same” category. If a large category like agriculture is not metered, the AT&C numbers will not be reliable. One must also bear in mind that in most cases, the regulators in India regulate government owned and managed entities, which itself is challenging. The proposed move to reduce slabs would certainly reduce the administrative burden for both utilities as well as consumers. This would, in turn, improve the revenue prospects for the utilities and reduce their losses. 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. Factory organization is often rationalized to make it as efficient as possible. 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. Rationalisation cannot be done to the extent that it is being talked about. If this sounds familiar, it may be time to look at SKU rationalization in your business. This document dated June 1999 is provided for the ADB project TA2633 in Indonesia. Het systeem is compatibel met de EU-eisen en biedt flexibele en uitgebreide functionaliteit, waardoor ook de nationale regelgeving kan worden toegepast. This must change. rationalization definition: 1. an attempt to find reasons for behaviour, decisions, etc., especially your own: 2. the process…. 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. Tariff Rationalization ... NTP (8.4 Definition of tariff components and their applicability) envisages explicitly the emphasis on the ToD Tariff. Tariff: A tariff is a tax imposed on imported goods and services. 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. Such developments would have a widespread impact in the long run for all stakeholders. 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 first thing is that the Ministry of Power (MoP) should not believe that it can run the state discoms remotely from Delhi. 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. Rationalization as a defense mechanism is similar to rationalization as a logical fallacy. 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. Today, for industries, the tariffs are really high. We find that the bilateral tariff reductions had opposing effects on scale. Against this backdrop, the importance of this issue cannot be less emphasised. Consumers, therefore, come under the state governments and their regulators. Rationalization is one of the most common defense mechanisms. This requires complicated accounting and is not the business of the discom. The hue and cry over the increase in the prices of petrol, and attributing it to the government is not just. Enhanced focus on efficiency in service delivery through appropriate structural realignments and operational cost optimisation. 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. In psychology and logic, rationalization or rationalisation (also known as making excuses [according to whom?]) A tariff is a tax imposed by a government on imports or exports of goods. See more. 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. The Meaning of Rationalization in Psychology Explained With Examples. In India, the tariffs have been generally distorted. The Electricity Act, 2003 also clearly outlines the role of the regulators – to stabilise, guide and nurture the sector comprehensively. 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. copyrighted © 2021 The Express Tribune. Unless otherwise stated, all content is 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. As soon as consumption crosses 200 units, consumers move into the next slab for which the tariffs are higher. Another issue relates to high tension consumers, that is, consumers with consumption of 1 MW and above, who are the real revenue generators. Rationalization The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. TV) (Tariff Agreement, July 2, 1997, Protection From Rationalization Measures, Termination of Employment, and Income Protection (Protection Agreement)). What, according to you, should be the key considerations of regulators while rationalising the tariff structure? The aim here is to complet… Ensuring high reliability and standards of service. What is tariff rationalization? There could also be a discount for steady and large purchases made consistently. 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. Rationalization means organizing something into a logically coherent system. 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. Further, there is inconsistency in the categorisation of certain consumer segments across states. This revision implements increases to pay schedules, to “dynamic supplements,” and the adjusted date for terminating these pay schedules in accordance with Tariff Agreement This sort of reorganization may lead to an expansion or reduction in … 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. ArcticTARIFF is een compleet web-based tariefsysteem voor de douane-administratie overheden in de landen van de Europese Unie (EU). This is a long-pending need of the sector and is clearly emphasised in the National Tariff Policy. Lowering of retail tariffs through efficiency and realignment of the generation mix. Elimination of cross-subsidy as well as the concept of regulatory assets. Political economy of state-owned utilities needs to be acknowledged and viable political solutions need to be found. This is so because industries have to cross-subsidise agriculture. 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. Also, the situation on the ground varies from state to state. The power sector in India is at the cusp of an unprecedented transformation, essentially driven by technology. For example, for domestic consumers, there is a slab for those who consume only 100-200 units. Tariff rationalisation would bring in greater transparency for consumers and provide better control on operations for discoms. 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. We have been going in the opposite direction, charging more for higher consumption and less (or even free) for the smallest consumers. redistributed or derived from. Comments are moderated and generally will be posted if they are on-topic and not abusive. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. This also gives a clear signal to consumers that they should save energy and opt for five-star-rated appliances. (noun) Designs for tariff rationalization If Indian industries have to compete globally, they cannot be asked to pay the highest tariffs in the world. Further, the multiple slabs have created multiple consumer categories and we get a very complex structure, which leads to multiple inefficiencies. 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. 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. Today, the entire burden of cross-subsidising agriculture finally falls on industrial and commercial users. 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. Further, this will discipline those who are supplied below-cost power because they know they are being measured. Please leave this field empty. This gives a clear message that as you consume more, you have to pay more. However, we believe that the proposed move will not only rationalise the slabs but also align tariffs with the cost of supply. Learn more. Trade reforms that amount to tariff reductions or real cur- rency appreciation may act mainly to reduce domestic demand for import- competing products. This material may not be published, broadcast, rewritten, Sector experts share their views on how the tariff structure can be rationalised and the key considerations in doing so…. Rationalize definition: If you try to rationalize attitudes or actions that are difficult to accept , you think... | Meaning, pronunciation, translations and examples 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. However, such high tariffs based on connected load are not feasible for other categories such as public drinking water supply schemes. A common template for industries and commercial users may be possible across the states. How would the proposed move impact discoms and consumers? There appear to be some misperceptions about the, recent tariff rationalisation of electricity. 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. 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. India’s current consumer tariff structure is a highly complex one, characterised by numerous categories and tariff slabs across various states. The effectiveness of the regulatory system would depend on the convergence of approaches between these two sets of regulators. This is the time to make price lists more sensible. Govt. Tariff definition, an official list or table showing the duties or customs imposed by a government on imports or exports. Since government and municipal hospitals cater to socially and economically disadvantaged patients,  their tariffs are kept low. 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. 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. 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. 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. 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. 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. 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. Another key issue that must be taken into account before rationalising tariffs is that discoms should adopt advanced meter reading or automatic meter reading and eliminate the involvement of any human element. For more information, please see our Comments FAQ. 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. While fixing tariffs, the regulator must consider these aspects. Too many tariff slabs, which may not necessarily reflect the cost of supply, lead to much higher administrative costs for monitoring consumers. However, for private hospitals that are run on a commercial basis, there cannot be lower tariffs. (Note: Arun Srivastava’s views are his personal views as a power professional and may not necessarily be aligned to Tata Power’s views.). Tariff rationalisation: myth and reality. In a sensible market, prices are related to volume. Please leave this field empty. 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. 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 proposal was also discussed at the state power ministers’ conference in May 2017. 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. 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. 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. 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. 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. 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. It would create problems because municipal corporations will find it difficult to recover these costs from their consumers by levying higher water charges. But within one category, like hospitals, there are different types of consumers – government, municipal and private. one tariff line will affect other industries. of Pakistan adds subsidies and "tariff Rationalization Surcharge" to make it uniform and notify. 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. 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. 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