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Chaos was probably defined keeping Arvind Kejriwal’s Aam Aadmi Party’s (AAP) governance in mind. Even before taking oath (which is not formally being in power), the government announced a 50 per cent cut in power tariff, because their manifesto said so. Nothing really wrong in that, in India as well globally, political parties survive on such freebies. But there is a method to this madness which others follow that AAP has continuously ignored.
AAP believes in the policy of shoot first and ask questions later. It assumed that the power distribution companies were padding up their cost to earn extra profits. It has ordered the Comptroller and Auditor General’s(CAG) office to carry out an audit. This has been contested by the distribution companies who have taken the matter to the High Court who have asked CAG not to publish its report till its next date of hearing in mid-March 2014.
AAP’s action betrays its activism mentality rather than its governance capabilities. Here are five points that AAP and Arvind Kejriwal should have pondered upon before going to town with their announcements.
1) On hike in power tariff
Kejriwal said discoms (distribution companies) should have waited for the CAG report before announcing a tariff hike. The same logic should also be applicable for AAP before announcing a tariff reduction. DERC announced the hike based on its quarterly review of the cost of distribution companies.
2) On announcing 50 per cent tariff cut
Justifying the 50 per cent reduction in power tariff, Kejriwal and team said that distribution companies were padding up costs. This is unlikely for the simple reason that 85 per cent of the cost is incurred by them in purchasing power from generation companies. The maximum room they have in cooking up their numbers is in the remaining 15 per cent.
3) On who will bear the cost of power tariff cut
AAP while announcing the cut in power tariff said that this is a subsidy till the time the report from CAG proves them right that distribution companies were padding up their numbers. AAP decided to give Tata Power Rs 61 crore as subsidy and wanted BSES to adjust the amount from what it owes the Delhi government run generating and transmission companies. However, Section 65 of the Electricity Act 2003 is clear that the subsidy has to be paid in advance. There is no provision for adjustments. In fact the section goes on to say that “..no such direction of the state government shall be operative if the payment is not made in accordance with the provision contained in the section..”
4) On cancellation of licences
When BSES Yamuna, a distribution company in Delhi, said that it would not be able to supply power for 8-10 hours due to lack of funds, Kejriwal threatened that he would cancel their licence (using many more threatening words to prove his point). Theoretically, it is the DERC that can cancel the licence under Section 19 (d) of the Electricity Act 2003 which states that “..where in the opinion of the Appropriate Commission the financial position of the licensee is such that he is unable fully and efficiently to discharge the duties and obligations imposed on him by his licence.” AAP has rightly asked the DERC to cancel the licence, but the problem is BSES Yamuna is in a financial mess largely because of the money that DERC owes it. It would be very difficult for DERC and the Delhi government to explain its stand in the court of law if BSES appeals against licence cancellation. DERC as of March 31, 2012 owed the distribution companies Rs 11,000 crore.
5) On who would like to work with AAP government
Arvind Kejriwal said that there are other power distribution companies in the country that can replace Reliance and Tatas. But who, begs the question, would like to work with a government that believes in not paying what is due. Even if the existing licences are cancelled, the new player would have to be paid the subsidy upfront.
The entire issue of power tariff cut could have been handled smoothly had the government waited for the CAG report and paid the distribution companies the subsidy amount. But where is the fun in doing it smoothly without the media attention and public posturing. After all that is how anarchy functions.
