The Madhya Pradesh government is preparing to sign a 25-year power-purchase agreement (PPA) with private companies for 4,000 MW of electricity at the rate of ₹5.83 per unit. The proposal has been sent to the Madhya Pradesh Electricity Regulatory Commission for final approval. Experts warn that if the proposed rate is cleared, the state will end up paying more than ₹1 lakh crore in additional expenditure over the contract period—an amount that will ultimately be borne by consumers.
Former Additional Chief Engineer of the Madhya Pradesh Electricity Board, Rajendra Agrawal, has formally objected to the proposal before the Regulatory Commission. In his letter, he argued that recent significant reductions in generation costs—due to the removal of coal surcharge by the Central Government, rationalisation of GST, and withdrawal of mandatory Flue Gas Desulphurisation (FGD) norms by the Environment Ministry—have not been factored into the power-purchase rate. Agrawal has demanded a comprehensive review of the capital cost and purchase structure before granting approval.
The new proposal has once again placed Madhya Pradesh’s electricity procurement and supply system under scrutiny. Expensive legacy contracts with private companies have already strained consumers, and further burdens risk pushing households and industries into deeper financial stress. Rising tariffs and worsening fiscal pressure on discoms have triggered a larger debate on the state’s energy management.
Over the past few years, electricity tariff hikes and billing irregularities have become a major concern for households, farmers, and small businesses. A complex structure of energy charges, fixed charges, fuel cost adjustments, and duty surcharges ensures that every price increase cascades across all components of the bill. Multiple CAG reports and public policy reviews have raised questions about Madhya Pradesh’s decision to procure electricity at significantly higher rates from private producers, tied to old PPAs, heavy fixed charges, and opaque contractual provisions.
One of the most controversial aspects has been the “take-or-pay” clause, under which payment must be made regardless of whether electricity is drawn or not. Between 2020 and 2022, the state reportedly paid ₹1,773 crore to private companies without purchasing a single unit—an amount that was ultimately passed on to consumers. Similarly, pass-through provisions allowed increased fuel costs to be transferred directly to discoms and subsequently to consumers. Captive private plants sold electricity at ₹4.50–₹6 per unit even when the spot market price fluctuated between ₹2 and ₹3.
Despite adequate capacity at state-owned generation units, Madhya Pradesh continued high-cost procurement from private producers. Economists argue that many of these contracts were signed during periods of high coal prices (2010–2015), but instead of renegotiating terms when market conditions changed, the state remained locked into costly obligations due to weak regulatory oversight and lack of transparency.
Consumers today pay significantly higher electricity bills than neighbouring states. For 200 units of consumption, the average household bill in Madhya Pradesh is around ₹1,425, compared to ₹900 in Chhattisgarh and ₹785 in Gujarat. For 300 units, the difference widens further. In many homes, bills have risen 15–25% over recent years, forcing cuts in essential household expenses. Families are delaying non-essential spending, paying bills in instalments, and struggling with sharply increased smart-meter bills, which have triggered widespread complaints across districts.
While the government has launched the Samadhan Yojana 2025-26 to offer relief on arrears, temporary assistance will not solve a structural crisis rooted in expensive private contracts, mismanagement, and persistent distribution inefficiencies such as line losses, power theft, poor billing systems, and legacy deficits.
The question demanding urgent attention is why consumers must continue paying for decisions that benefit private power companies at the cost of public welfare. Madhya Pradesh’s discom losses have soared from ₹2,100 crore in 2000 to ₹69,301 crore by March 2024, even after unbundling under the 2003 Electricity Act, which was justified as a reform to reduce losses and modernise management. Instead, it has resulted in expensive electricity for citizens and high profits for private producers—ironically reversing the original intent of the 1948 Electricity Act, which defined power supply as a public service to be delivered at reasonable rates.
Madhya Pradesh must now take transparent measures: renegotiate costly agreements, reduce fixed charges, prioritise competitive renewable energy, improve regulatory accountability, and ensure that citizens are not punished for systemic failures. Electricity pricing is no longer a technical issue—it is a question of economic justice. The right to affordable electricity is integral to household survival, agricultural sustainability, industrial competitiveness, and the overall health of the state’s economy.
If the state chooses to ignore these concerns, the burden on citizens will only grow heavier and the trust deficit between consumers and the power system will deepen. The government must act responsibly before it is too late.
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*Bargi Dam Displaced and Affected Collective
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