Published On: Thu, Dec 26th, 2013

Arvind Kejriwal commitment of cheaper power may not be possible

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Arvind kejriwal (APP) may have to hold his horses about lower electricity bills as new chief ministerArind kejriwal  may find it difficult to fulfil his promise Delhi, say industry players and experts.

While Delhiites lapped up the populist promise, discoms in the city said it will be “nearly impossible” to lower the rates, given that the accumulated loss faced by them is as high as Rs 11,000 crore.

leader Kejriwal’s victory in Delhi was pegged on promises, with halving electricity rates in the city and conducting an audit of power ditributions companies (discoms) being some of the major ones.

Kejriwal during his election campaign said that if the Tatas and Ambanis don’t accept his terms, they are free to walk out and the state can take over the discoms. The two corporate houses refused to comment officially on this, but their executives told ET on condition of anonymity that they may go for arbitration if forced to reduce rates. Also, experts want that the state taking over discoms may be a regressive decision which will burden Delhi’s already stretched finances.

Discoms argue that in the last 10 years, cost of power has increased 300% owing mainly to higher coal prices and interest rate, but the rate at which they sold it to retail consumers has increased by only 70% in the period.

“How can you ask a loss-making distribution company to cut power tariff ? Despite the efficiency introduced by us in the city, we are struggling with huge losses. Who will bear the burden of a cut in tariff ?” a top executive from one of the Dilhi-discoms told ET, wishing anonymity.

Kejriwal’s promise of delivering cheaper power faces two big challenges: Who will bear the cost of cheaper power? And, how will the state government reduce power tariff when it is regulated by an independent regulator?

“The rise in cost does not reflect in the increase in tariff, this has led to a huge build-up of future receivables (regulatory assets) to the tune of over Rs 20,000 crore for the three discoms, impacting the sustainability of operations of the Delhi discoms,” another official said. Power distribution was privatised by Delhi in 2002, and subsequently three discoms were set up — Tata Power-run North Delhi Power, Reliance Infrastructure’s BSES Yamuna Power, and BSES Rajdhani Power.

“Pricing of power entails a statutory process and only the regulatory commissions can fix tariff after taking into account interest of all parties involved. The government cannot give directions to the regulator to reduce tariff. If the government wants, it can subsidise power,” said Pamod Deo, former chairperson, Central Electricity Regulatory Commision .

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