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Delhi's power economics not so simple!

By Arvind Padmanabhan : Only a proper cost audit by an independent agency, like the office of the Comptroller and Auditor General of India, can ascertain if there is, indeed, scope for a large cut in the capital's power tariff - which the Aam Aadmi Party promises to halve.


The power utilities in the capital which distribute electricity in the city as also the Aam Aadmi Party have put forth their arguments in detailed letters to the administration, copies of which are with IANS. Not surprisingly, they all sound equally convincing.

Let's look at what BSES Rajdhani, one of three distribution companies, or discoms, has to say in this regard:

According to it, 80 percent of the company's cost pertains to the purchase of power over which it has no control since it is under long-term contracts negotiated with state-run electricity generating companies like the National Thermal Power Corp.

In the past 10 years, since fiscal 2003, the bulk power cost has increased 300 percent -- that is from Rs.1.42 per unit to Rs.5.71 per unit today. These rates also have the approval of the regulatory authority -- hence no question of any false reporting.

In contrast, the power tariff has increased 65 percent in these 10 years -- from Rs.3.06 per unit to Rs.6.55 per unit. The bulk of the hike happened in the past two years, with virtually no upward revision in the preceding five years.

The company says the city's discoms still have an unrecovered cost of Rs.20,000 crore. Even the consumer price index, which determines the retail inflation, has risen by 120 percent in these 10 years. The actual tariff, the firm says, should be Rs.7.40 per unit.

How, then, have the discoms managed to keep the tariff hike at just 65 percent when the bulk purchase price has risen 300 percent? This is thanks to a significant reduction in what is called technical and commercial loss, an euphemism for theft!

BSES claims that this loss, or leakage, which was as high as 57 percent at one time, has come down to a "world record" level of 17 percent -- that is a reduction of a whopping 40 percentage points.

In other words, the amount saved between 2003 and 2013 is Rs.37,500 crore or Rs 7,500 crore per annum, equivalent to 25 percent of the capital's annual budget. Naturally, the firm claims, it has resulted in a major saving on subsidy outgo.

But the Aam Aadmi Party, led by its chief minister-designate Arvind Kejriwal, has a different version, which it spells out vide an open letter and eight annexures.

Quoting the chairman of Delhi Electricity Regulatory Commission Brijender Singh in 2010, the party says thanks to the significant gains made by the private distribution firms in pruning commercial losses, electricity tariff should actually be cut by 23 percent.

"Power companies had projected Rs.630 crore losses for 2010-11. However, Brijender Singh concluded that they would make profits of Rs.3,577 crore, which, if passed on to the consumers, would result in 23 percent reduction in tariff," the party said.

But the Sheila Dikshit government appointed a new regulatory chairman and under him, the tariff was instead increased by 22 percent. "The above two actions of Sheila Dikshit completely changed the tariff scenario in Delhi," the AAP letter states.

The party also claims that there is inconsistency in ascertaining distribution losses as projected by the discoms.

In the Alaknanda circle, in the city's south, for instance, distribution losses that had come down from 16.9 percent in 2007-08 to 6.29 percent in 2008-09, dramatically rose to 8.9 percent, while for Nangloi in the west, it rose from 10.97 percent to 19.34 percent.

The losses, the party said, rose in 18 out of 21 circles operated by one company. This apart, the party claims, two of the discoms also bought power from state-run utilities at high rates and sold to a sister company at very low rate to create artificial losses.

Accordingly, the party says, there is scope to halve the tariff. This is how:

In 2010, if your electricity bill was Rs.100, Brijender Singh wanted it cut by 23 percent. So the bill should have been Rs.77 per month. You, however, continued to pay Rs.100.

In 2011, under a new regulatory authority chairman, P.D. Sudhakar, the tariff was hiked by 22 percent, instead of lowering it, so your bill went up to Rs.122. Then again, in 2012, the tariff was hiked further by 32 percent, to push the bill to Rs.161 per month.

AAP concludes saying that, in Brijender Singh's view, in addition to the 23 percent cut he had recommended, there was also scope to reduce it further in the years to come. Accordingly, instead of Rs.77 per month or lower tariff, you are still paying double -- Rs.161.

In terms of actual electricity consumed, your two-month bill for 200 units, as per the party's contention, should be Rs.503, against which you are paying Rs.1,505. For 400 units, it should be Rs.2,205, against which you are paying Rs.4,400.

The arguments from both sides seem too simplistic and even stretched. But with Kerjiwal set to take over as the next chief minister, one hopes for an independent audit of the capital's power economy to tell what its residents ought to pay for their electricity - a major expense in the domestic budget.

Highlights of Delhi's power economy

-Discoms say 80 percent of capital's electricity tariff pertains to cost of bulk power purchased from state-run generating firms

-Discoms say bulk purchases are long term contracts over which they have little control

-In the past 10 years, the bulk power cost increased 300 percent from Rs.1.42 per unit to Rs.5.71 per unit

-But power tariff increased only 65 percent in 10 years from Rs.3.06 per unit to Rs.6.55 per unit

-At the same time, distribution losses came down from 57 percent to 17 percent

-Discoms say they still have accumulated losses of Rs.20,000 crore

-Aam Aadmi Party says certain tariff hikes in the past were unjustified

-It feels there is scope to reduce tariff by 50 percent

(Arvind Padmanabhan is executive editor with IANS. He can be reached at arvind.p@ians.in)

--IANS (Posted on 26-12-2013)

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