Power tariff wars in the capital


In New Delhi the new government runs after the power distribution companies to ensure that people do not continue to be overcharged.

The dead heat between the new Aam Aadmi Party’s (AAP) government and power distributing private companies (discoms) in Delhi is going to become more intense, sending blistering shock waves all over the country. This new Delhi government won the elections for many reasons, not insignificant was the public resentment over issues of accessibility of civic services and pricing of public utilities notably electricity and water. In 2002, the Delhi government had privatised distribution of electricity to three private sector companies. The reason offered was power theft and under recovery of dues. The arrangement between Delhi Electricity Regulatory Commission (DERC) and these three companies (two of these are sister concerns of Reliance and one of Tata) ensured that power theft reduced significantly and revenues of discoms increased. Had matters stopped here the case would perhaps be differently judged in favour of public private partnerships in utility provision. Instead the distributing companies have raised prices more than once with the sanction of the regulatory commission. None of the professed benefits of privitisation like reduced prices, rapid increase in new areas becoming power connected have followed. Instead there have been several reports that the discoms have understated revenues, shown lower sales, higher cost of equipment purchased from its parent concern.

The former chairman of DERC, which decides the tariff structure, drafted an order stating that discoms had made a profit of Rs. 3577 crore and not a loss of Rs. 630 crore as they claimed. According to him, tariff should have come down by 23 percent in 2010-11 and he had claimed there was a case for further reduction. Instead the new DERC chairman raised power tariffs by 22 percent in 2011 and 32 percent in 2012, on the basis of the claimed losses. He accepted the discom’s loss projections by accepting their claims: a) That the surplus power produced was lower than what had been projected including what a report by the Central Electricity Authority found. b) That the price at which surplus power was sold was lower than the one projected. In 2008-09, electricity consumption by Delhi Jal Board and Delhi Airport were found to be shown as zero, in order to deflate revenues and increase losses. Between 2004 and 2006, equipment purchased by Reliance’s discom from its sister firm Reliance Energy was recorded at a price of Rs. 1,428 crore. Records from Delhi’s VAT department showed Reliance Energy had purchased these at only Rs. 850 crore. Two discoms were showing zero bills for several consumers on their records even as these customers had consumed electricity and paid bills. During the initial phase, distribution losses had come down uniformly (55 percent to 15 percent on the whole) but started increasing for many circles again. To back up many of the claims it makes, AAP has several documents obtained through the Right to Information Act which they put up in the public domain.

During his election campaigns Delhi chief minister Arvind Kejriwal had repeatedly alleged that the discoms had managed to get higher tariffs by fudging their accounts, inflating costs and corruption in high offices that permitted them to do so. He had asked consumers not to pay their electricity bills till the time the government slashes power tariffs. Soon after being sworn in as chief minister, he ordered a 50 per cent cut in tariffs for many consumers and a Comptroller and Auditor of India (CAG) audit of the discoms. The discoms reacted by first claiming that they were beyond the purview of the CAG. When Delhi High Court denied them immunity from CAG audit they went to press about losses, inability to pay their supplier NTPC, therefore to supply power to Delhi and threats of power outage in the capital– that amounted to a direct blackmail in a very charged political atmosphere. Delhi government is not blinking yet, and has asked DERC to look for alternative power distribution companies, withdraw licenses of existing ones if needed. The outcome will no doubt interconnect many areas of concern in political economy today, but there is an over-all sense from the ground that people know too much now to stay passive.


Anuradha Kalhan

The writer is a Lecturer, Dept of Economics, Jai Hind College, Mumbai.