The ordinary consumer has to pay the price for the mismanagement of electricity companies. Consumers in Madhya Pradesh, already troubled by expensive electricity, now face a possible additional burden of 10 percent. This is reportedly linked to the draft rules being prepared by the Madhya Pradesh Electricity Regulatory Commission for the next five-year retail tariff period, to take effect from April 1. At present, a loss of up to 14 units out of every 100 units of electricity is permitted. The new proposal aims to raise the permissible loss limit to 24.5 percent. In other words, a loss of 24.5 units out of 100 would be treated as justified. To make up for this extra loss, the companies will have to buy more electricity, and the full financial burden, along with its recovery, will be passed directly on to consumers through their electricity bills.
And this is when the power companies in Madhya Pradesh are already selling surplus electricity at Rs 3.81 per unit while charging consumers Rs 7 to 8 per unit, and passing on to consumers the burden of their losses, debts, costly power purchase agreements, and transmission and distribution losses.
Burden On Consumers
The latest news is that the power distribution companies have changed the Fuel and Power Purchase Adjustment Surcharge (FPPAS). For the period from September 24 to October 23, 2026, the FPPAS has been raised from 4.59 percent to 5.06 percent. This may add to the burden on consumers' bills across the state.
The current crisis in Madhya Pradesh's power system is not merely a matter of rising tariffs. Behind it lie many layers: wrong assessment of power generation, purchase and demand, sale of surplus electricity, the financial inefficiency of power companies, expensive power purchase agreements, transmission and distribution losses, and mounting debt. The economic burden of all these inefficiencies is ultimately being placed on the state's electricity consumers.
On one side, consumers have had to bear a 4.8 percent tariff hike since April 1, 2026. On the other, the state's surplus electricity is being sold in the open market at roughly half the price. This gap raises serious questions about the economic structure of the power system. According to the latest tariff order, about 10,198 million units (MU) of surplus power are expected to be sold in the open market during 2026-27.
Surplus Electricity
In addition, about 899 MU will be supplied to industrial sectors. Thus the total planned surplus sale will be about 11,100 MU. More significant still, the total surplus electricity available in the system is estimated at over 20,000 MU. This means a large quantity of electricity is not being fully used within the state, and part of it has to be sold to other buyers at low prices.
This cannot be dismissed as the ordinary working of the market. When consumers are forced to buy expensive electricity on one side, while the same system's surplus electricity is sold far cheaper on the other, it is natural to question the entire process of power planning and demand assessment. Rajendra Agrawal, a retired Additional Chief Engineer of Madhya Pradesh Genco, links this situation to weak power planning. He says electricity is bought at high prices, but when it goes unused it has to be sold at low rates. According to him, the financial burden of this difference ultimately falls on consumers.
Gap Between Purchase And Sale
All of these questions are extremely important. If the state's power companies are buying electricity that is not immediately needed, who will pay for it? If electricity costing around Rs 7 to 8 per unit, or purchased at other high rates, goes unused and is sold at around Rs 3.81 per unit, the gap between purchase and sale will hurt the finances of the power companies. The losses of power companies are, in one form or another, made up through tariffs, government assistance or public money. This clearly means the consumer is not only paying for the electricity he uses, but is also bearing the cost of poor planning and surplus power.
The question of financial losses and debt should be seen in the same context. When the gap between the income and expenditure of power companies widens, they have to borrow. Interest must be paid on the loans, and the effect of this financial pressure eventually shows up in the cost of electricity and in tariffs.
Expert Suggestion
This cycle becomes even more serious when operational inefficiencies, wrong demand assessment and long-term power purchase agreements are not adequately reviewed. Experts have suggested reviewing the expensive power purchase agreements. This matters because the demand for and availability of electricity keep changing. If long-term agreements are signed at high purchase prices, then when demand falls in the future, surplus electricity may have to be sold in the open market at low prices.
So the question should not be only how much electricity the state needs. It should also be at what price, for how long and on what terms electricity is being bought. A transparent review of power purchase agreements, a scientific assessment of actual demand, and an independent evaluation of future power requirements are essential.
Technical Efficiency
Another major problem in the power system is transmission and distribution losses. Losses that occur on the way from the generation centre to the consumer, due to technical and other reasons, increase the real cost of electricity. If these losses are not controlled, their cost too is ultimately recovered from the consumer. The lower the technical efficiency of the power companies, the higher the effective cost per unit of electricity. Merely continuing to raise tariffs, without fixing old networks, overloaded transformers, line losses, power theft and weaknesses in the distribution system, cannot be a fair solution for consumers. Therefore, in fixing power tariffs, it should also be made clear how much of the companies' costs are genuine and unavoidable, and how much arises from management and operational inefficiencies.
According to the state government, of about 1.9 crore electricity consumers, about 1.4 crore are protected through subsidies, especially those who use up to 150 units a month. This certainly gives consumers immediate relief, but subsidies too are paid from the government budget. The money the government has ultimately comes from taxes paid by the public and from public resources.
Burden Of Real Cost
So it is not enough to assume that subsidies have removed the burden of the real cost of the power system. If power companies run into losses because of inefficiency and the government covers those losses or subsidies, the burden still falls broadly on the public.
The continuous rise in electricity costs does not affect only household consumers. Industry, small businesses, agriculture and the service sector are affected as well. Expensive electricity raises production costs and ultimately affects the prices of goods and services. For a household, a higher electricity bill directly hits the monthly family budget. For small traders and industries, electricity is a significant part of production cost. Rising power prices therefore also put pressure on employment, investment and the local economy.
Madhya Pradesh's power policy needs to be reconsidered. Increasing power generation capacity is not an achievement in itself. The real questions are how much of the electricity produced is actually used, at what price it is bought, how much is lost in technical and distribution losses, and how much has to be sold in the market at low prices. If the state has over 20,000 MU of surplus electricity on one side and consumers must buy expensive electricity on the other, then a policy of simply expanding generation capacity naturally invites questions.
Independent Review
What is needed now is an independent review of the financial and technical functioning of the power companies. The expensive power purchase agreements should be publicly reviewed. A full account of the purchase and sale of surplus electricity should be made public. A time-bound plan should be drawn up to reduce transmission and distribution losses. And before the burden of the companies' losses is placed directly on consumers, it should be determined what caused those losses.
Consumers have the right to know why, when they are charged Rs 7 to 8 per unit for electricity, the surplus electricity of the same system is being sold at about Rs 3.81 per unit.
The present power situation in Madhya Pradesh poses a basic question: will the consumer also have to pay for the inefficiency, wrong planning and expensive power purchases of the power companies? On one side is a 4.8 percent tariff hike, on another the sale of more than 11,100 MU of electricity at low prices, and on a third the availability of more than 20,000 MU of surplus electricity.
Double Burden
These figures raise serious questions about the planning and financial management of the power system. If the losses of the power companies, rising debt, interest burden, expensive power purchase agreements, and transmission and distribution losses keep being added to the cost of electricity, consumers will keep bearing a double burden. The consumer is paying not just for expensive electricity, but also for the inefficiency of the power system.
Therefore, before raising power tariffs, the government and the regulator must ensure that every cost of the power companies is reasonable, necessary and efficient. The policy of buying expensive power and selling cheap power, and then passing the resulting losses on to consumers, must stop.
Madhya Pradesh's electricity consumers must now demand not merely cheap electricity, but a transparent, accountable and economically efficient power system.
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*With Bargi Dam Displaced and Affected Association
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