Why “One Nation, One Unit Rate” for Electricity Can Transform Indian Industry, Reduce Household Burden, and Accelerate West Bengal’s Industrialization
An Investigative Analysis for IBG NEWS By Suman Munshi
Kolkata:
India today has One Nation, One Constitution, One GST framework, One National Power Grid, and One National Electricity Market, yet the price paid by citizens and industries for electricity varies dramatically from one state to another. A middle-class family consuming the same amount of electricity may pay substantially different monthly bills simply because they live in different cities. Likewise, industries manufacturing identical products often face significantly different production costs due to variations in electricity tariffs.
This disparity raises an important policy question: Should India move towards a “One Nation, One Unit Rate” for electricity?
While such a policy would require careful balancing of constitutional, regulatory, and financial considerations, its potential impact on economic growth, industrial development, and social equity deserves serious debate.
Electricity: The Foundation of Modern Economic Growth
Electricity is no longer merely a utility service. It powers:
- Homes and schools
- Hospitals
- Digital infrastructure
- Agriculture
- Small businesses
- Heavy industries
- Data centers
- Electric mobility
Every major economic activity depends upon affordable and reliable electricity.
Therefore, electricity pricing has become an issue of economic policy, not merely energy policy.
The Existing Inequality
A middle-class family occupying a two-bedroom apartment typically consumes:
- Approximately 250 units per month without air conditioning.
- Approximately 500 units per month with one regularly used air conditioner.
However, the monthly bill differs considerably across India.
| City | Approximate Monthly Cost (250 Units) |
|---|---|
| Chennai | ₹875 |
| Delhi | ₹1,000 |
| Hyderabad | ₹1,375 |
| Bengaluru | ₹1,450 |
| Kolkata | ₹1,725 |
| Mumbai | ₹1,950 |
Thus, two families with identical lifestyles can pay vastly different amounts solely because of their location.
The Situation in Kolkata
Over the past decade, electricity tariffs in Kolkata have increased considerably.
Approximate comparison:
| Year | Average Effective Rate |
|---|---|
| 2011 | ₹4.2 per unit |
| 2025-26 | ₹7.3 per unit |
This represents an increase of approximately 74%.
Meanwhile, domestic coal prices—the primary fuel for thermal power generation—have also risen substantially. However, electricity tariffs are influenced not only by fuel prices but also by:
- Transmission costs
- Distribution losses
- Infrastructure investments
- Fuel adjustment mechanisms
- Regulatory policies
- Fixed charges
- Cross-subsidization among consumer categories
Therefore, coal prices alone do not explain the entire increase in consumer tariffs.
Why Electricity Matters Even More for Industry
For industries, electricity is among the largest operating expenses.
Sectors highly dependent on electricity include:
- Steel
- Cement
- Chemicals
- Aluminium
- Engineering
- Electronics
- Textiles
- Food processing
- Information technology
- Data centers
Even a seemingly small tariff difference can significantly affect profitability.
India’s Industrial Power Sources
India generates electricity from multiple sources:
| Source | Approximate Share |
|---|---|
| Coal | 70-75% |
| Hydroelectric | 8-10% |
| Solar | 8-10% |
| Wind | 4-5% |
| Natural Gas | 2-4% |
| Nuclear | 2-3% |
| Others | 1-2% |
Although renewable energy is expanding rapidly, coal remains the backbone of India’s electricity generation, particularly for industrial demand.
The Real Cost Difference for Industry
Consider a medium-sized factory consuming 10 lakh (1 million) units of electricity every month.
| Tariff | Monthly Cost |
|---|---|
| ₹5/unit | ₹50 lakh |
| ₹6/unit | ₹60 lakh |
| ₹7/unit | ₹70 lakh |
| ₹8/unit | ₹80 lakh |
A difference of merely ₹2 per unit results in:
- ₹20 lakh additional cost every month
- ₹2.4 crore additional cost every year
For large manufacturing units, these differences directly influence investment decisions.
Why Industries Choose Certain States
When companies decide where to establish factories, they evaluate:
- Electricity cost
- Land availability
- Logistics
- Skilled manpower
- Government incentives
- Infrastructure
If electricity is substantially cheaper in one state than another, industries naturally gravitate toward the lower-cost location.
Consequently, regions with relatively higher electricity costs may struggle to attract new manufacturing investments.
Why This Matters for West Bengal
West Bengal possesses several strategic advantages:
- Major ports
- Rich mineral connectivity
- Excellent rail network
- Large workforce
- Access to eastern and northeastern markets
- Gateway to Bangladesh, Nepal, Bhutan, and Southeast Asia
Yet electricity cost remains an important consideration for investors.
If electricity tariffs were harmonized nationally or significant disparities reduced, West Bengal could become substantially more competitive for:
- Manufacturing
- Electronics assembly
- Textile industries
- Food processing
- Warehousing
- Data centers
- MSMEs
Lower and more predictable electricity costs could encourage both domestic and foreign investment.
The Problem for Small and Medium Enterprises
Large corporations often establish:
- Captive coal plants
- Solar installations
- Wind projects
- Hybrid renewable systems
Small and medium enterprises cannot typically afford such investments and therefore depend entirely on the local electricity distribution company.
As a result, MSMEs are disproportionately affected by higher tariffs, reducing their competitiveness and limiting job creation.
Benefits of “One Nation, One Unit Rate”
A nationally harmonized electricity pricing framework could:
Promote Equal Treatment
Citizens consuming similar quantities of electricity would face comparable costs irrespective of geography.
Strengthen Manufacturing
Uniform electricity costs would reduce regional disadvantages and improve India’s attractiveness as a manufacturing destination.
Boost West Bengal Industrialization
Competitive electricity pricing could attract industries that currently favor other states due to lower operating costs.
Help MSMEs
Small businesses would gain from predictable and potentially lower energy costs, improving profitability and employment generation.
Increase Investment
Transparent electricity pricing simplifies long-term financial planning for investors.
Support “Make in India”
Lower energy costs enhance the competitiveness of Indian products in global markets.
Challenges to Implementation
A nationwide tariff is not without difficulties.
States differ in:
- Generation mix
- Transmission infrastructure
- Distribution losses
- Consumer density
- Subsidy policies
- Financial health of distribution companies
Electricity is also a subject involving both the Union and the States, making tariff harmonization a complex policy issue.
A Practical Alternative
Rather than imposing an identical tariff nationwide, policymakers could consider:
- A National Base Electricity Tariff for domestic and industrial consumers.
- Transparent state-funded subsidies where governments wish to provide additional relief.
- Standardized billing formats.
- Reduction of excessive cross-subsidies.
- Greater efficiency in distribution.
- Periodic tariff revisions based on objective and transparent cost indices.
Such a framework could preserve state flexibility while reducing unjustified disparities.
Conclusion
India has successfully created a single national electricity grid, enabling power to flow across states. The next stage of reform may be to ensure that the benefits of this integrated market reach both households and industries through a more harmonized pricing framework.
For ordinary families, it could mean lower and more predictable monthly bills. For businesses, especially MSMEs and manufacturers, it could reduce production costs and encourage investment. For West Bengal, competitive electricity pricing could strengthen its position as a preferred destination for industrial development and employment generation.
The objective need not be absolute uniformity at all costs. Rather, it should be to ensure that where a citizen or an entrepreneur lives does not become an undue economic disadvantage simply because of the price of electricity.
(This article is an investigative policy analysis based on comparative tariff estimates, publicly available regulatory information, and economic reasoning. It is intended to stimulate informed public debate and does not advocate any specific government policy.)
© IBG NEWS
