A K Bhattacharya: Why can't DTC go the DVB way?

NEW DELHI DIARY

Five years ago, the power distribution business in Delhi was privatised. The Delhi Vidyut Board (DVB), which used to provide electricity to the entire state, was dissolved at the end of June 2002. In its place, five new corporate entities were set up""three in the private sector and two in the state sector. The state-owned entities were engaged in the business of power transmission (Delhi Transco) and in power generation (Delhi Genco). All the three entities in the private sector were in the business of power distribution""two were promoted by BSES (now Reliance Energy) and one by the Tatas. The Delhi government had minority stakes in each of these three companies.

How has the privatisation of the power distribution business worked in the last five years? After the initial hiccups and some controversy, the privatisation experiment seems to have worked for the benefit of all the stakeholders. The private companies that took over the distribution business have gained as they managed to bring down the aggregate technical and commercial (AT&C) by a huge margin""much more than the 17 per cent reduction to which they had committed themselves.

Tatas-promoted North Delhi Power Limited (NDPL), which serves about one-third of Delhi's population, has reduced its AT&C losses by more than half""from 53 per cent in 2002 to 24 per cent now. BSES Rajdhani and BSES Yamuna, which serve about 10 million people, have also reduced their AT&C losses, though by a smaller margin. The losses for BSES Yamuna have come down to 39 per cent from 63 per cent. In the case of BSES Rajdhani, the losses are down to 30 per cent from 52 per cent.

For the Delhi government, the experiment has meant that it no longer carries the annual subsidy burden on account of the losses incurred by the DVB. That annual loss used to be as high as Rs 1,100 crore. At the time of privatisation, the government had capped its subsidy assistance at Rs 3,450 crore for a period of five years. Now, the Delhi government does not have to worry on that score.

Consumers too have gained. The electricity tariff in Delhi (Rs 2.73 a unit) continues to be the lowest among the big metropolitan cities like Mumbai (Rs 3.10), Bangalore (Rs 3.60) and Kolkata (Rs 3.90). BSES Yamuna and BSES Rajdhani have invested close to Rs 3,000 crore in augmenting the network facilities, which has seen a sharp rise in the number of grids, power transformers, feeders and shunt capacitors. NDPL also has invested about Rs 1,350 crore to improve the distribution network facilities.

The overall consumer satisfaction level with the services rendered by the three companies is much higher than what it used to be with the DVB. Some consumers might argue that the service from NDPL is better than that provided by the BSES companies. But on the whole Delhi's electricity consumers have begun appreciating the benefits that have come along with privatisation even though they may have to pay a little more because their new electronic meters are at last recording their power consumption accurately. In fact, few consumers in Delhi today would like to go back to the old DVB regime. The billing system has got better, payment mechanisms are now more consumer-friendly and even power cuts have begun following a schedule announced well in advance.

Of course, there is a lot more that should happen on the consumer satisfaction front. Power availability should improve. Consumers should have the right to choose their distributors. In other words, the promised "open access" should be introduced. An obvious imponderable is how these distribution companies will pass on the additional costs of power now that Delhi Transco will no longer be the only source from where they can buy electricity. But given the manner in which the regulatory system in the power sector has taken care of the interests of all stakeholders, there is no reason to believe that the privatisation experiment can go wrong at this stage.

Delhi Chief Minister Shiela Dikshit should take credit for the bold initiatives she took while pressing ahead with reforms in the power sector. There were many detractors of the move in 2002. But Mrs Dikshit stood by her officers and resisted all political pressures to roll them back. Which is why, it is a big surprise that even though the success of the power sector reforms story has now got recognition, the chief minister has so far refused to draw the appropriate lessons from her own initiative taken five years ago.

The complete failure of the state-owned Delhi Transport Corporation (DTC) in providing a reliable public transport service in the state and the mess that has been created by a half-hearted experiment with small bus operators should have been an ideal opportunity for Mrs Dikshit to replicate the DVB model in the transport sector. With its existing fleet of buses and the network of transport infrastructure, DTC is an ideal candidate for privatisation. It is possible to split DTC into four or five smaller corporate entities and then these could be hawked to the best bidders. Let the government set up a regulator which should monitor the fares and ensure that the operators maintain the basic standards of a public transport service. A regulator will be a better bet than the Delhi Traffic Police!