Sunil Jain: Grinding slowly, but surely?

RATIONAL EXPECTATIONS

The wheels of justice, like the mills of the gods, we're told, grind slowly but surely. Given the huge rush of cases in the country's courts, it's easy to understand the slow part. But the Delhi High Court's judgment on the petition challenging the Delhi Vidyut Board's privatisation makes you wonder a bit about the "surely" part as well. While rejecting part of the petitioner's (Gajendra Haldea's) plea that the privatisation was unconstitutional since it created private monopolies, the judgment agreed with his plea that the directions of the Delhi government (fixing the rates of return for the private distribution companies apart from fixing various other parameters which were the purview of the regulator) were, in the court's words, "unsustainable in law and is ultra vires the provision of the DERA (Delhi Electricity Reforms Act, 2000)".

Having said this, the court said that it was too late to undo all that had transpired in the intervening period""the fact that the five-year initial arrangement during which these special concessions were to be offered to the private distribution companies had expired was one of the factors that persuaded the court to rule this way.

Imagine the injustice. Delhi's citizens are forced to pay a higher price for their power because the state government passes highly debatable orders in favour of the private sector firms, and the court doesn't ask for any of this to be returned. Nor did it think it necessary to hear the case quickly when the petitioner first argued that the impact of the government's directions would hurt all of Delhi's citizenry.

Yet, in various other cases, the country's courts, including the Supreme Court, have taken up cases on an emergency basis. So, when Anil Ambani's court case threatened to hold up the privatisation of Delhi and Mumbai airports, the case was disposed of fast; indeed, when an appeal was filed on whether the Delhi regulator could reduce the depreciation paid to the private distribution companies in 2006, the case was disposed of in less than a year. Clearly the courts need to find ways to prioritise cases that involve the greater common good.

What was this common good that Haldea argued? First, he said that by handing over the DVB's distribution function to three distribution companies (one in each part of Delhi), the government was replacing a public sector monopoly with a private one. The courts said that this was not correct since the Delhi Electricity Regulatory Authority (DERA) said "the licensee shall not claim any exclusivity". It is the Delhi government's decision to fix the returns for them, and to reduce the regulator to merely a calculator, that angered the court.

On November 22, 2001, the Delhi government issued a notification telling the regulator that the private distribution licensees would be given a return of at least 16 per cent on their equity and free reserves; that licensees would be allowed to retain half of what they earned if they exceeded loss-reduction targets; that the government would give Transco Rs 2,600 crore to allow it to supply these firms low-cost power; and so on. (Prior to this, the government had written to the regulator with these details, and the regulator had objected saying he disagreed with the method in which losses were being calculated, and so on, and also pointed out that the directions amounted to curtailing his powers""indeed, the regulator got to know of the fixed 16 per cent return only when the directives were issued!)

When, on May 31, 2002, the government concluded its negotiations with these distribution companies and lowered the loss-reduction targets, these policy directives to the regulator were revised. The opening loss levels would not be those determined by the regulator but would be the ones mentioned in the revised bids of the successful bidders (if the opening loss levels were increased, the companies would be able to show they'd achieved higher loss-reduction and avail of the performance incentives!); the Transco funds were raised to Rs 3,450 crore; and so on.

What's interesting is that while the court's ruling that the government was not within its rights to issue these directives is perfect fodder for the BJP, the party has hardly reacted""tells you just how dulled the party's political instincts have got.

While the court has refused to get into the arguments raised by the CAG and the Public Accounts Committee, which had pointed out that several thousands of crore worth of concessions had been given to the private distribution companies, it has said "the response of the (Delhi government) to the above findings of the PAC and the CAG does not inspire much confidence" and has asked it to, by September 2, table a reply to the PAC's report in the Legislative Assembly and to publicise "sufficiently well" its reaction to the points raised by the CAG. (These charges have been extensively reported since 2002 and the DVB's last chief Jagdish Sagar's response to my last report, on September 2, 2005, was published in this paper's Op-Ed page on September 5, 2005).

On the positive side, apart from a moral victory for the petitioner and all those who criticised the privatisation, what the court judgment mean? It has reinforced what various other judgments have ruled in the past, that state governments cannot give directions that contravene the law. Hopefully other governments will keep this in mind the next time around.