Multi-year tariffs: issues and experiences in South Asia

There is growing recognition that the annual determination of tariff is averse to regulatory and political uncertainty. The shift to a multi-year system is expected to bring in not only a reduction in regulatory effort and risk, but will also lead to provision of a transparent and stable system of incentives. This would, therefore, not only result in higher efficiency in the electricity distribution system bur also encourage greater private sector interest in the power sector. In recent years, quite a few regulatory commissions in South Asia have attempted to move away from the annual tariff determination to a multi-year framework, including regulators from India and Pakistan. In this regard, the SAFIR workshop on Regional pricing strategies in South Asia was held in Delhi on 13-14 August 2003, which reviewed the status and shared experiences across South Asia and other countries. It also developed a strategy for moving towards implementation of an MYT (multi year tariff) regime. The papers and discussions during the workshop brought our different viewpoints from the various stakeholders and suggested a path for undertaking action points. Experiences in Andhra Pradesh, Delhi, Karnataka, and Uttar Pradesh were discussed at length. Apart from this, international experiences with regard to MYTs were also discussed with special emphasis on Pakistan and Brazil. Dummy financial and economic models were also discussed at the workshop. This publication reflects emerging views on the subject, and will serve as a useful reference guide to those associated with the tariff setting.