 "Power price cut: is it just a poll promise?")
As the date of polling nears, the claims of AAP and BJP that if voted to power, they will bring electricity rates down in Delhi are becoming shriller. BJP, in its '10-point formula', has said that it will cut prices by 30 per cent. AAP has promised to bring tariff down by 50 per cent.
Both parties agree that distribution companies (discoms) are to blame for high rates and propose measures to introduce "transparency" in their working. These include introducing an open-access policy, ordering an audit of discoms by the Comptroller and Auditor General (CAG) and bringing them under the Right to Information Act. AAP, in addition, proposes to independently verify the electricity bills of consumers for any errors.
Amidst these claims and counter-claims, a valid question to ask is whether power tariffs in Delhi are as high as they are made out to be? And, if there is scope for reducing the rates.
The answer lies somewhere in between. Power tariffs in Delhi are neither too expensive nor very low. Data from the Central Electricity Authority, or CEA, which summarises tariffs of all states, shows that the tariff in Delhi for the first 200 units is more expensive than in metros like Mumbai (Tata Power), Chennai and Ahmedabad. But, it is cheaper than in Bangalore and Hyderabad. Further, a comparison of Delhi with its neighbouring states shows that Uttar Pradesh, Haryana, Punjab and Rajasthan have higher power tariffs.
A comparison of the March 2012 tariffs with those of March 2013 reveals that prices have increased by 24 per cent in Delhi. However, during the same period, tariffs in Tripura rose by 91 per cent, in Maharashtra by 52 per cent, in West Bengal by 35 per cent and in Kerala by 34 per cent. Then again the increase was lesser in Mumbai, Gujarat, Bangalore and Kolkata. During the same period, tariffs decreased in Tamil Nadu (by 5 per cent), Ahmadabad (2.2 per cent) and Uttar Pradesh (0.95 per cent).
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For the first nine years after privatisation, there was no significant increase in tariffs. Private distribution companies did ask for power rates to be increased within a few years of taking over the business, but Delhi's power regulator declined to accede. However, tariffs went up by an average 21.7 per cent in August 2011, 20.8 per cent in July 2012 and by 5 per cent in July this year. Post the last increase, tariff for the lowest load consumers (with usage of 200 units per month) in the domestic category went up to 3.9 per unit.
For 2013-14, the three discoms had petitioned the Delhi Electricity Regulatory Commission, or DERC, for an Aggregate Revenue Requirement (ARR) of 19,044 crore. At the increased tariff, the total revenue accruing to the three discoms works out to 15,360 crore as compared to the approved ARR of 14,448 crore, leaving a surplus of 911 crore for discoms this fiscal. After taking into account the 8 per cent surcharge, the total revenue will go up by an additional 1,228 crore, leaving a net surplus of 2,140 crore with the companies. This surplus will offset a major portion of the accumulated revenue gap of 3,497 crore, leaving a net incremental shortfall of 1,356 crore this fiscal.
Any tariff reduction announced by AAP or BJP, in case they manage an electoral victory, will further inflate this revenue shortfall. The three companies, put together, already have accumulated regulatory assets (RAs) - cost recovery allowed by regulator in future - of over 11,000 crore. DERC has recently allowed levying an 8 per cent surcharge to cover this build-up of RAs. That attempt would be nullified by any move to reduce tariff.
"The three companies are already running into losses. We are working on a plan to neutralise the RAs over the next 4-5 years through the 8 per cent surcharge and tariff revisions. In case tariff is reduced by 30 per cent or 50 per cent, it would spoil the plan," says a senior DERC official. "It is not practically possible, unless, of course, the government of the day decides to increase the subsidy component," he adds.
The cost of power generation has been rising in the country. Companies argue that the cost of power generation has followed the curve along the rise in prices of coal and gas. In Delhi, 90 per cent of the total power is sourced through thermal power tations and the rest is contributed through hydro power. Further, of the thermal power stations, 68 per cent are coal-based and the rest are gas-fired.
The DERC official also backs the assertion of the impracticability of reducing tariff. He argues that the Power Purchase Cost (PPC) component alone accounts for over 80 per cent of the cost of supply.
For the BSES discoms, the Bulk Power Cost (which includes the cost of generation and transmission) has jumped by around 300 per cent from 1.42 per unit in 2002-03 to 5.71 per unit last financial year. However, average retail tariff across categories has increased by 66 per cent over the same period to 6.5 per unit.
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Power distribution in Delhi was privatised in 2002. Delhi Vidhyut Board, which was making losses, was decontrolled and private players were invited. Subsequently, three private discoms came up in Delhi.
At present, Tata Power Delhi Distribution, a joint venture between Tata Power and the government of Delhi, supplies power to the northern and the north-western part of the city. The rest of the capital gets its power supply from BSES Yamuna Power and BSES Rajdhani Power. BSES is owned by the Reliance Anil Dhirubhai Ambani Group. Two relatively smaller regions in the capital - New Delhi Municipal Corporation and Delhi Cantonment - are supplied by state-owned companies.
A decade later, the capital is considered a success story in power distribution reforms as power supplies here have stayed ahead of the steadily rising demand. Though the total requirement has gone up from 3,000 Mw in 2002 to 6,000 Mw now, the three power discoms have succeeded in meeting the 100 per cent jump in demand. Load-shedding, which had become rampant in the last decade of the 1990s, has become a thing of the past.
Since the introduction of private discoms, transmission and distribution losses in the capital too have come down. According to the Delhi Economic Survey (2013-14), since private discoms started operations in 2002, the transmission and distribution losses in Delhi have been brought down to 17 per cent from 60 per cent.
Both BJP and AAP have claimed that power rates can be brought down by cutting down transmission and distribution losses. According to Prayaas Energy Group, a Pune-based NGO, their claims might have some weight considering that Bangalore, Chennai, Hyderabad, Kolkata and Mumbai have discoms that are more efficient.
For both AAP and BJP, the problem clearly lies with discoms. BJP says it will introduce "transparency" in the working of the discoms by ordering an audit by CAG, curtailing "unnecessary" power purchases to bring down the cost by Rs 2 per unit, ensuring more autonomy to DERC by appointing "competent" people and controlling power thefts.
Though the discoms have so far refrained from responding to the allegations against them, DERC has told the Delhi High Court that it is in favour of conducting a CAG audit and bringing discoms under RTI.
BJP and AAP's primary argument is that discoms in Delhi have "monopolised" power. And the solution lies in introducing an open-access system which allows customers to choose from among the power discoms. This was the primary objective of the Electricity Act 2003 which had envisaged open access as a system to introduce competition in the power sector.
Although the facilitative framework created by the Central Electricity Regulatory Commission has started the system of open access at the inter-state level, none of the states has provided the option to ordinary customers. At present, this option is only available in Mumbai where customers can choose between Reliance Infra and Tata Power.
The advantages of open access can be seen in Mumbai where, unlike Delhi, the power tariffs between the two discoms vary significantly. According to the CEA data as on March 2013, for the first 200 units Tata Power supplies power at 2.48 a unit while Reliance Energy charges 5.34. A study by Prayaas says that until June 2011 about 160,000 customers (including 83,000 domestic customers) migrated from Reliance to Tata.
A key part of BJP's strategy is "curtailing unnecessary purchase of power". The party says "power companies buy more electricity than what Delhi requires. As a result, customers pay an additional 2 per unit".
Delhi government's argument is that more power is bought to meet the peak demand. An inter-city comparison by Prayaas Energy Group shows that peak demand in Delhi is much higher than in any other city. For instance, Delhi's peak demand is around 5,000 Mw, which is 57 per cent more than that of Mumbai which has the second-highest peak demand. Further, Delhi has a non-uniform demand with large variations between peak and minimum demand.