 "Tata, RInfra not worried about power tariff cut in Delhi")
Tata Power and Reliance Infrastructure, the distribution entities of Delhi will be delivering on Aam Aadmi Party's (AAP) promise to cut power tariffs by half, albeit with subsidies.
“The balance after subsidy will be paid by the government and the decision does not impact us,” said Pravin Sinha, chief executive of Tata Power's Delhi distribution entity told a television channel. The company's stock which was trading down by one per cent at 12 pm, had already recovered with the company's assurances and was trading flat at Rs 91, around 1 pm.
Reliance Infrastructure did not comment on the state government's move. However, an official said that they are yet to get an order from the government to this extent. “We do expect them to pay the subsidy gap,” he said. The company's stock has been trading up four per cent at Rs 430.
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The total gap for three months will be around Rs 200 crore for the government, which will benefit 2.8 million power consumers. Experts have earlier said that the state government which is already an equity owner in all three discoms managed by the private entities should bear the burden.
“The government can always forego their equity earnings from the companies,” Umesh Agarwal, associate director of PriceWaterhouseCoopers, had said earlier. A Reliance Infrastructure official also said that power secretary of the state sits on the board of the distribution entities, and that all the decisions are taken after their approvals, making it clear that government has the right to decide the prices of power.
Analysts however wonder if the government will be able to maintain their subsidy payments over time. “If they want to cut prices, how will they fund anyways base costs and losses. It looks like elementary to me,” said a power analyst at a Mumbai-based stock broking firm.
Delhi distribution companies are already making losses as they had entered into long-term power purchase agreements during Commonwealth in 2010. The power purchase cost of distribution companies accounts to 85 per cent of total costs, leaving very less room for possible savings.