The policy gives clarity on determination of cross-subsidy and additional surcharges for open access to consumers and lays down a timeframe for rationalization of electricity tariffs and decrement of cross- subsidies. It also lays down the formula for computation of cross-subsidies. Consumers below the poverty line and consuming a little quantity of electricity should continue to receive special support by cross-subsidised tariffs. To provide a choice of supply to the consumers, the tariff policy enunciates a facilitative framework for calculating cross-subsidy surcharge. It also lays down a mechanism for arranging backup supply for such consumers.
The multi-year tariff (MYT) framework is to be adopted for any tariffs to be denotes from April 1, 2006 along within incentives and disincentives for better performance. The move towards multi-year tariffs also involves regulatory certainty. An investor could now understand with reasonable certainty the future course of action and direction of tariffs and therefore make better investment decisions. Gains from effective operations are to be shared along with consumers. Continued and proven inefficiency must be penalized and controlled.