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Power Woes of Delhi
The Indian power sector, particularly transmission and distribution, is in the doldrums. Hit by economic downturn, inflation, long years of mismanagement by state-owned distribution companies and the inability of private companies to clean up the mess it is in the grip of terminal sickness.

Little wonder that the Congress, which has ruled Delhi uninterrupted for 15 years, is facing the flak as a large part of the mess has been created by it. And little wonder Arvind Kejriwal is having a ball, scoring brownie points. While he can use the situation to cash in on voter sentiments, he is not entirely right in opposing the private distribution companies (dis-coms).

Both Tata Power and Reliance Energy, which took over distribution of power in the capital, have had a herculean task combating state subsidies, theft of power, fixing busted meters and cleaning the system of corrupt practices. In Delhi, for long, many parts of the city had busted meters, which were never fixed because the corrupt assistant engineers sent inflated bills to customers so as to settle across the board for smaller tariffs,with handsome money going into their pockets.

It’s not as if the Congress did not know. Actually, it was helpless. It appointed a CBI officer to identify and root out corruption by making him the head of the system. He did a good job, albeit to a certain extent only, because busted meters were not entirely replaced all over the city. Only those who had the influence to approach him could get their meters fixed. Others had to sweat it out till the private dis-coms arrived.

The private dis-coms had to absorb the inefficient officials as they had threatened agitation over privatisation. Both Tata and Reliance, which run the dis-coms through the ubiquitous name of Rajdhani Power, with their jurisdictions clearly divided, had a tough job bringing these errant officials into a new system of corruption-free practices and proper billing, chasing and settling consumer tariffs.


Huge expenditure with no subsidies

The private dis-coms incurred huge expenditure in installing new generation equipment to supply power and also to ensure that busted meters were replaced, that transmission lines were policed and that the latest generation power meters were established at the consumers end. With no subsidies expected from the government, the private player had no other choice but to increase the tariff to recover the investment. As tariffs had not been revised for a long time, the sudden spurt in tariff rates seemed stiff.

Kejriwal is fighting the ghost of Hamlet. He is shadow boxing with the government by hitting at the private dis-coms. Both Tata Power and Reliance Energy are professionally managed companies, and they have a cost for money. Kejriwal, an IIT-alumnus, must know that dis-coms cannot function under an uneconomic tariff system and the government cannot force them to drop tariffs as the result would be that dis-coms would withdraw.

Grim prospects of blackouts

Gopal Saxena of Reliance Energy, which controls BSES Rajdhani Power Ltd (BRPL), says that he could well break a mandate to supply round-the-clock electricity to 1.8 million customers. Or better still, he could await two power utilities to ward of threats of disruption in supplies to his company, unless the disputed amount of $590 million arrears in late payments is settled. The net result is that the capital of Asia’s third-largest economy faces the grim prospect of blackouts in the run up to the elections which could fuel negative sentiments with voters.

Saxena’s dilemma reveals the abysmal depths to which India’s power sector has sunk into after years of rising debts, fuel supply shortages, corruption, red tape and artificially low tariffs. In the oppressive summer last year, India suffered a massive blackout, hitting an area where 670 million reside.

It is true that private dis-coms such as BRPL and Tata Power have definitely helped improve electricity supplies in Delhi since they took control over distribution business from the state. But they have achieved it at a huge cost to their companies. The tariffs private dis-coms in Delhi have been allowed to charge by a state electricity regulator have risen nearly 70 per cent since 2002, but the cost of buying electricity from generation companies and supplying it has shot up by more than 300 per cent, claims Saxena.

Crisis time for BRPL

So it is crisis time for BRPL, which is now slapped with claims of $770 million (over Rs 4620 crore) in late payments to more than a dozen power utilities. Two of these, Pragati Power Corporation Ltd (PPCL) and Indraprastha Power Generation Company Ltd (IPGCL), have threatened BRPL to pay up or lose power supply. If the threat materialises, then BRPL would be forced to cut power supplies by 30 per cent for a period of four hours at peak times, which means load shedding to consumers when heaters don’t run in winter and air conditioners don’t work in summer. The voter ire would be at its peak against the government, which it can ill afford.

It’s unfortunate that many in the country see cheap or free power as a right, not a privilege; the Private dis-coms are going to be further hit this year and next as raising tariffs is a tough proposition as the country gears up for a general election in May. Delhi, which separately goes to the polls in a state election in November, witnessed street protests against tariff hikes in March that was led by anti-corruption activist Kejriwal, who has escalated it to the next level.

Kejriwal’s fast is going to win votes for himself but it’s not going to solve the problems of consumers in terms of reduced power tariffs. If government forces dis-coms to drop tariffs in an election year for vote banks, private dis-coms in all probability will walk away from the distribution business as their business operations are run on commercial lines of profitability and not on loss- making populist schemes.

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