During his first shot as Chief Minister, Delhi, Arvind Kejriwal had promised 50% cut in power tariff. He did so primarily on his conviction that the power distribution companies [PDCs] had indulged in financial irregularities leading to inflated cost of procurement and distribution. These were approved by DERC [Delhi Electricity Regulatory Commission] acting under diktat of then political dispensation [a clear indication of how regulator was forced to play to his masters tune can be gauged from the fact that the then chairman who had approved 23% reduction in tariff in 2010 was removed and his successor affected hike of 22% in 2011 and a further 32% in 2012].
Kejriwal’s plan was to nail these irregularities and recover excess sums allowed to PDCs for giving effect to promised tariff cut. Immediately on taking charge, he announced audit of these distribution companies by CAG [Comptroller and Auditor General] to be completed on ‘fast track’. The PDCs put up several obstacles, first by objecting to the very jurisdiction of CAG conducting such an audit [in this regard, they filed a writ petition in Delhi High Court purportedly to throttle its setting up] and thereafter, non-cooperation via non-submission or delayed submission of the requested data.
The CAG has now submitted a draft report to Delhi government [nearly 20 months after Kejri announced the audit]. The findings reveal that PDCs had charged consumers excess tariff by a staggering around Rs 8000 crores. It also reveals Rs 7957 crores of ‘inflated’ regulatory assets [RAs][a euphemism for previously incurred losses that can be recovered from consumers if allowed by regulatory authority]. Taking this in to account, the excess tariff charged from consumers would be much more.
As on March 2013, the RAs were Rs 19,500 crores. That amount included Rs 12,500 crores as claimed by PDCs but not scrutinized by regulator. Such huge sums of RAs allowed to remain on the books without even scrutiny points towards something much more than sheer inefficiency of the regulator. It smacks of a well orchestrated game plan of PDCs acting in collusion with DERC to let things linger on till such time public interest dissipates giving latter an opportunity to surreptitiously allow tariff hike.
Considering that bulk of these RAs have not even been scrutinized by the regulator, it can be safely inferred that the extent of inflation in RAs would be far more than pointed out by CAG. This together with excess tariff already allowed would be a humongous amount well in excess of Rs 20,000 crores on which prompt action is required. Both the Delhi and central government must act in unison to ensure that the CAG report is expeditiously finalized and action areas identified to bring quick relief to consumers.
Another major factor contributing to losses in the books of PDCs is the continuing large-scale theft of power [notwithstanding claims that these have reduced since privatization in 2002]. This is happening not only in slums/jhuggi clusters but also in industrial areas. It is pathetic that honest consumers are made to pay [via higher tariff] even for free supply enjoyed by such dubious characters. The irony is that the latter pay bribe to local leaders and political big-wigs to ensure that they continue to have access to free supply. Even as corrupt politicians/local leaders/officials merrily make money, hapless consumer is burdened with ever increasing tariff hike.
The government needs to take tough action to countenance this menace as well. It should fix accountability for the losses suffered due to power theft and initiate action against all those who allowed this to happen. Given the political will, it should not be difficult to even recover money from users who indulged in power theft [for instance, looking at relevant parameters, one can work out how much power an industrial plant would have used]. For the future, it is no rocket science to ensure that every user viz., household, industry, business etc has a meter and is made to pay for the electricity consumed [any tapping of power from the pole can be spotted by a discerning eye and prosecution initiated against the person responsible].
With the aforementioned steps to be implemented within a reasonable time frame, Delhiites will not only be spared future hike in tariff [that Damocles sword will hang if current high RAs of well over Rs 20,000 crores are not put under the hammer as pointed out by CAG], they can even be relieved from present high tariff. While, Kejri promised 50% reduction for consumers in the range 0-400 units per month, sincere action on the CAG report can even help in giving such relief across the board for all consumers.
The malady afflicting the power sector in Delhi is symptomatic of a deeper mess that majority of the state electricity boards [SEBs] and power distribution companies [PDCs] are in all over the country. Their balance sheets are bleeding because of ‘inflated’ cost of procurement and distribution, large-scale power theft [patronized by political establishment] and supplies to farmers at artificially low tariff [even free, in some states]. All put together, the SEBs/PDCs incur a cumulative loss of about Rs 300,000 crores.
Ironically, the reforms packages [unveiled from time to time] ostensibly aimed at reducing these losses, focused only on increasing tariff while playing lip service to aforementioned three major sources that are solely responsible for their bleeding. Unless steps are taken to address these, any amount of tariff hike will fail to make a dent on the losses. Its contagion effect on power producers, state budgets and banks who are often roped in to bail out PDCs/SEBs too cannot be wished away.
Stopping power theft, disbanding cult of free power and dispensing with favors to owners of PDCs all pose a formidable challenge. It requires confronting the deeply entrenched vested interest, throwing short-term political gains to the backyard and above all killing the menace of corruption. Modi has amply demonstrated courage and guts to tackle such evils in other areas [for instance, LPG, coal etc]. If, he can deliver in the power sector, that will bring unprecedented relief to consumers and give a big boost to his ambitious plans for 24×7 supply of power to every home.
While, central government may have differences with Kejriwal on a host of issues concerning governance, in regard to power sector at least, the former must lend full support to the latter [whose stance has been fully vindicated by CAG revelations] in setting things right. In fact, taking a cue from Delhi, Modi should organize similar audits in other states and based on their findings initiate corrective action to stem the rot.