Delhi power rate cut a poll issue but falters on economics

Any further reduction will play havoc on govt's subsidy budget, say observers

The Aam Aadmi Party, Bharatiya Janata Party and Congress are promising to halve Delhi's power rate if elected to office but any lower than Rs 2.8 a unit could play havoc with the state's budget.

The combined financial loss of Delhi's three power distribution companies was Rs 22,000 crore in 2012-13 when the state government provided a subsidy of Rs 118 crore to them. If rates are halved, the subsidy would need to be doubled.

"Either the subsidy will have to be increased or the distribution companies will take a bigger hit. What is the economic basis of these claims on lowering the power rate?" said a power industry executive.

Delhi's bulk power purchase rate was 60 per cent higher than the national average of Rs 3.49 a unit, but power tariff charged from the consumers in the state were the lowest in the country at Rs 2.8 a unit said an executive with one of the distribution companies.

Delhi's power supply business was handed over to private companies in 2000, when technical and commercial losses were 47 per cent. The three distribution companies - Tata Power Delhi Distribution Ltd (TPDDL) and the Anil Ambani-promoted BSES Rajdhani Private Limited (BRPL) and BSES Yamuna Power Limited (BYPL) - have brought these losses down to 11 per cent in the past 10 years, leading to annual savings of Rs 13,000 crore.

The companies are opposing further rate cuts. "Nearly 50 per cent of the total cost of power has been offset by the loss reduction in the last 11 years. Else, consumers would have been paying a tariff of Rs 14.50 per unit," said an industry executive.

The companies also said Delhi's power customers had saved Rs 45,000 crore in 12 years because of this.

The energy charge levied by the power distribution companies increased to Rs 3 a unit in from Rs 1.8 in 2002, but power purchase costs tripled to Rs 5.6 per unit during the same period . The additional revenue which cannot be passed to the consumers has created over-dues of Rs 30,000 crore for the distribution companies, as they bear the cost.

The Delhi Electricity Regulatory Commission last November rolled back a rate hike in less than 24 hours and its officials said a review would be conducted after the Assembly elections.

"Eighty-five per cent of a distribution company's cost is the power purchase cost, which is beyond their control. Delhi receives 100 per cent of its power from central and state power generating stations, with one-third being supplied by NTPC. All power purchase agreements are signed by the government and have been passed on to the distribution companies," said an executive with one of them.

"Delhi receives uninterrupted power except on rare days during peak demand or due to technical glitches. Still, power is being used as a poll issue. We should look at strengthening the financial health of distribution companies instead of burdening the financials of the state government," another executive said.

POWER PLAY

Promises

• Subsidy on electricity of Rs 1.20 per unit up to 200 units of consumption. Subsidy of 80 per cent for consumption between 200 and 400 units - BJP
   
• Power consumption of 0-200 units would be charged Rs 1.5 per unit and those above would be given 50 per cent discount by reigning in the private companies - Congress
   
• Electricity bill to be reduced to half - Aam Aadmi Party

Fact check

• Any further reduction and subsidy burden on state government to double
   
• Financial burden on discoms to increase with per rate decrease in tariff
   
• Rate hike owing to power purchase cost going up deferred several times under political pressure