A Case Study on Tariff Classification of R&D Units:Commercial vs Industrial

Research and Development (R&D) units play a critical role in process industries such

as paints, fertilisers, chemicals, pharmaceuticals, and automotive manufacturing.

These facilities support formulation development, testing, validation, and continuous

process improvement that directly impacts industrial production.

In this case, an R&D unit supporting the automotive industry was initially billed

under the Commercial electricity tariff category. This classification resulted in

significantly higher energy costs, despite the R&D activities being integral to

industrial operations.

This case study explains how the tariff was reclassified from Commercial to

Industrial, and the financial impact achieved through correct regulatory

implementation.

How Commercial Tariff Became the Default for the r&d unit

At the time of electricity connection and initial tariff assignment, the distribution

company classified the R&D unit under the Commercial tariff category. This was

primarily because:

• There was no separate tariff category defined for R&D units

• The facility included laboratories and office-type areas

• The industrial linkage of the R&D activities was not documented in detail at the

  initial stage
  

As a result, Commercial tariff became the default classification, even though the R&D unit was functionally industrial in nature.

What Determined the Reclassification Tariff

• Earlier, distribution companies classified R&D units under Commercial tariff by

  default.

• Regulatory provisions later clarified that R&D units linked to industrial processes

are eligible for Industrial tariff classification, provided the nature of activities is

properly justified.

• However, this change is not automatic. It must be implemented by adopting the prescribed regulatory procedure and submitting technical justification showing that the

  R&D work is industrial in nature.
  

Real-Time Case Study: Commercial to Industrial Tariff Conversion

R&D Unit Profile Industry linkage: Automotive (R&D Standalone Unit)

Contract Demand: 3,800 kVAVoltage level: 33 kV

Monthly energy consumption: ~8,00,000 units Before Reclassification

Tariff category: HT-II Commercial

Average energy rate: ₹20.24 per unit

The R&D unit was paying Commercial tariff despite

performing industrial R&D activities. After Reclassification Tariff category: HT-I Industrial

Average energy rate: ₹11.74 per unit

The change was implemented after following the prescribed regulatory process and

demonstrating that the R&D activities were directly related to industrial operations. Financial Impact Net saving per unit: ₹8.50

Monthly saving: ₹68 lakh

Annual saving: ₹8.16 crore

These savings are recurring and based on correct tariff classification structure for commercial & Industrial Category. How KTST Engineers Supports R&D Units

• KTST Engineers assists R&D units in process industries by:

• Assessing eligibility for Industrial tariff classification

• Preparing technical and regulatory justification

• Demonstrating linkage between R&D activities and industrial processes

• Coordinating with the distribution company until approval is implemented

• The focus is on compliant execution and sustainable tariff correction.

Key Takeaway

With proper justification and structured execution, tariff reclassification is achievable