The Delhi government on Wednesday ordered an audit by the Union comptroller and auditor-general (CAG) of private power distribution companies’ (discoms) finances, fulfilling another election promise of the Aam Aadmi Party.
“We have ordered an audit of the private power distribution companies. The CAG has said it will do the audit,” Chief Minister Arvind Kejriwal told reporters after a meeting of the Cabinet. He said Lieutenant Governor Najeeb Jung’s order on the audit of the companies will go to the CAG on Thursday. “From tomorrow, the audit will begin,” he said. The Delhi government had given time to the three companies — BSES Yamuna Power Ltd, BSES Rajdhani Power Ltd and Tata Power Delhi Distribution Ltd — till Wednesday morning to give their views on why there should not be a CAG audit of their firms. The discoms have contested the new government’s authority to subject their accounts to an audit by the CAG.
Delhi’s new government has made the national capital the cheapest power destination among all comparable cities and states. After the 50 per cent cut in rates announced on Tuesday, city households would pay Rs 1.95 for every unit of consumption in the lowest load category to the discoms.
This is significantly lower than in comparable cities — including Chandigarh, Ahmedabad, Bangalore, Mumbai and Chennai — and states such as Haryana, Uttar Pradesh and Rajasthan (see table).
Chief Minister Arvind Kejriwal’s announcement limited the mega subsidy dole to the domestic category, 80 per cent (2.8 million) of the city’s total of 3.4 mn connections. However, this category contributes only 20 per cent to the Rs 18,000 crore of discoms’ annual revenue.
Had the subsidy covered consumers in the commercial and industrial categories, too, the city government’s annual subsidy burden would have jumped 11-fold, to around Rs 9,000 crore. Also, the absence of agricultural load in the city and the already (relatively) lower rates made it easier for Kejriwal to announce the huge rebate.
Arguments
On Wednesday, the three private discoms justified to the government their stand against the latter’s demand for a CAG audit of their accounts. Kejriwal hopes the audit would expose financial irregularities and create grounds for a further rate cut. The national auditor has no authority to inspect private companies, the discoms are understood to have argued. However, a CAG official said it could be done if in the public interest.
The audit required a formal request from Najeeb Jung and an opportunity to the discoms to represent their case. Jung’s request was received by the CAG on Wednesday, said an executive close to the development.
“The discoms have argued in their presentation that the CAG audits only government-owned organisations and the discoms are joint ventures, with day-to-day management with the private entity and, hence, out of CAG’s ambit,” said another executive close to the development. The discoms also noted the issue was already in the high court here. “The matter is sub-judice. It is pending in the Delhi High Court with the next hearing scheduled on January 22,” said a TPDDL spokesperson.
The discoms are also understood to have told the government their accounts are already being audited by CAG-empanelled auditors and approved by their boards of directors, also comprising government nominees — these include the chief secretary, finance secretary and power secretary. The accounts are then sent to the Delhi Electricity Regulatory Commission.
Experts say Kejriwal has kept a poll promise but the real test would be sustainability of a subsidy-based model of distribution. “The only way to give immediate relief here was subsidy. This was anticipated. Domestic consumption is subsidised in other states and cities but only for weaker sections. Also, we have to see whether the model is financially stable, particularly as the cost of supply is rising in unprecedented ways,” says Anil Razdan, former Union power secretary. Rising cost of supply, coupled with unrealistic retail rates, have led to a massive Rs 19,000 crore of dues for the discoms.
Structure
Reliance Infrastructure holds 51 per cent stake in BSES Rajdhani and BSES Yamuna, which cater to 75 per cent of the city’s population. Tata Power holds 51 per cent in Tata Power Delhi Distribution Ltd (TPDDL) which caters to the rest. The Delhi government holds the balance of 49 per cent in each of the three companies through its holding company, Delhi Power Company Ltd.
Kejriwal’s subsidy announcement would have a total annual impact of Rs 800 crore, including Rs 200 crore to be borne by the city government in the January-March quarter. For the current quarter, TPDDL would receive Rs 61 crore as subsidy from the state government and the other Rs 139 crore will be adjusted against Rs 4,000 crore of dues yet to be paid by Reliance Infra to Delhi government-owned generation and transmission companies. As long as the subsidy is disbursed on time, the revenue of distribution companies would not be impacted.