In its election manifesto, Aam Aadmi Party (AAP) had promised to reduce electricity rates by 50% if voted to power in Delhi. Even before new Government under Mr Kejriwal settles down, doubts have been raised whether he can do it.
Staunch critiques rule it out completely on the ground that a 50% cut would require a steep increase in subsidy from existing Rs 550 crores per annum to nearly Rs 5000 crores. But, Mr Kejriwal is certainly not looking at this option.
He alleges that there is lot of ‘bungling’ in the manner three power distribution companies (PDCs) viz., BSES Yamuna Power/Rajdhani Power and Tata Power Delhi Distribution are run. They mis-appropriate funds through un-metered sales, inflated operation & maintenance cost, ‘gold plating’ of equipment cost etc.
To buttress his point further, he cites a Draft order by Delhi Electricity Regulatory Commission (DERC) which estimated that the 3 PDCs had a revenue surplus of Rs 3577 crores in 2010-11 and recommended a 23% cut in tariff (far from reduction, then Government slapped hikes).
In the belief that there is money within the system that can be tapped to give relief to consumers, new Government will announce an audit of the three PDCs and based on its findings, immediately thereafter, take necessary action.
Even as we wait for this exercise, prima facie there seems to be logic in Mr Kejriwal’s argument. One is also inclined to believe that he can deliver on his commitment without any additional subsidy support. Let us look at some facts.
Way back in 2001, power consumption in Delhi was around 20 billion units. At a procurement cost of about Rs 1.5 per unit (kwh), this was valued at Rs 30 billion (20×1.5) or Rs 3000 crores.
In a paper submitted to Electricity Regulatory Commission, erstwhile Delhi Vidyut Board (DVB) while seeking 100% hike in tariff, had conceded that there was large scale power theft. Theft was also valued at around Rs 3000 crores.
Taking a broad side view, we may surmise that theft or un-metered/un-registered consumption for which DVB did not receive payment was 20 billion units.
As per the paper, proposed increase in tariff was intended to garner an additional Rs 1300 crores to save DVB from going bankrupt. Though, this amount could have been realized through 43% curb in theft (1300/3000×100), Delhi government opted for the easier option.
It contended that under subsisting dispensation of state control, it was not possible to combat theft. That required reforms of power sector involving inter alia handing over distribution to private sector which happened in 2002.
PDCs claim that they succeeded in cutting losses from 57% in 2002 to 17% now. That is a steep reduction of 40% and should have been leveraged to neutralize the increase in cost of procuring and distributing power. That has not happened.
Instead, cost of electricity to consumers increased by 70%. Even in lower slabs of 0-200 (units per month) and 201-400, rates are Rs 3.9 per unit and Rs 5.8 per unit respectively (with subsidy of Rs 1.2/0.8 per unit). Without subsidy, these are Rs 5.1 & Rs 6.6.
Clearly, alleged reduction in losses just does not exist even as un-metered use of power continues unabated. The mess gets exacerbated when one considers ‘regulatory assets’ – a euphemism for revenue gap deferred to future – of Rs 19,500 crores!
So, what could be the extent of theft currently if not 17%? To get an idea, let us look at the following.
Delhi’s requirement for power is 5600 MW (mega watt). 1 watt yields 8760 watt hours (24×365) or 8.76 kilo watt hours (kwh) of energy per annum. 1 MW equals 1,000,000 watts. Hence, 1 MW will yield 8.76 million kwh per annum.
Thus, 5600 MW will generate around 49 billion kwh (units) of energy per annum (5600×8.76). As against this, reported consumption during 2012-13 was 25 billion units.
Juxtapose the two figures of requirement versus consumption, we get a whopping gap of 24 billion units (49-25). That represents ‘un-accounted/unpaid’ use of electricity.
This is close to 50% thereby indicating that there has been no improvement in the situation despite much touted reforms and privatization that promised huge relief. If these losses can be ‘completely’ eliminated, the results will be startling.
Taking a weighted average tariff of Rs 6 per unit (a ball park figure closer to rate for 201-400 slab; assuming that higher rates of Rs 6.8 & 7.0 for 401-800 and 800 slabs offset lower rate Rs 3.9 applicable to lowest slab 0-200), the revenue accruing from 25 billion units is Rs 150 billion (25×6).
Now, if this revenue is distributed over the entire requirement of 49 billion units – possible if balance 24 billion is metered and paid for – the resultant tariff would be Rs 3 per unit (150/49). That works out to a cut in tariff of 50% over the extant level.
Clearly, what Mr Kejriwal has promised is well within the realm of possibility.
In a less optimistic scenario, if losses are cut by 50%; in other words, an additional 12 billion units are paid for, tariff can be lowered to Rs 4 per unit (150/37). That yields a cut of 1/3rd, promised by BJP.
Instead of putting AAP on the knife edge, questioning Mr Kejriwal’s capability to deliver and putting all kinds of obstacles in his way, all stakeholders including Congress and BJP should extend whole-hearted support in achieving a common & laudable goal.
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