Free power is bad policy, says PlanCom member

Former cabinet secretary was responding to a question on dampening impact of calls for tariff reduction from various states

The Planning Commission doesn’t seem impressed by the rising chorus for power rate cuts in many states, triggered by Delhi Chief Minister Arvind Kejriwal’s 50 per cent relief for domestic consumers. According to the Plan panel, such a move will hit reforms.

“The policy of free power is a very bad idea and against the spirit of reforms. Unless we improve the financial health of utilities and stop the policy of freebies, it will be difficult to look after the ongoing reform process,” B K Chaturvedi, member (energy and infrastructure), Planning Commission, told Business Standard in an interview.

The former cabinet secretary was responding to a question on the dampening impact of the calls for rate reduction being made by states, encouraged by the Delhi government’s move months before general elections. “The sector is not in a position to bear the burden nationally. Consumers should pay what they can afford,” said Chaturvedi.

Encouraged by the Delhi move, the Maharashtra government announced a 20 per cent rate cut. So did Haryana. There are demands for similar cuts in Punjab, Chhattisgarh and Bihar.

Chaturvedi said power utilities providing support to the poorest sections is a good idea, provided they can afford it. That, however, is not the case. Power distribution companies had accumulated losses of Rs 2.4 lakh crore as of March 2012. Non-reflective rates as political freebies, coupled with the rising cost of power purchase, have led to a combined short-term debt of Rs 1.9 lakh crore.

The Centre had, in September 2012, announced a financial restructuring package to bail out discoms, which had timely rate revisions as a precondition. Eight major defaulting states have started restructuring the liabilities and rates were being corrected. However, Kejriwal’s announcement of subsidising power has dampened the enthusiasm for reforms, experts say.

The Delhi government has also ordered an audit by the Comptroller and Auditor General of India on discoms’ accounts. All the three discoms in Delhi, owned by Reliance Infrastructure and Tata Power, have moved the Delhi high court against the audit.

According to Chaturvedi, the government should allow re-bidding of those infrastructure projects where work is yet to commence and developers are facing difficulties in commissioning. He, however, cautioned against rebidding of projects in the power sector at advanced stages of commissioning.

The Central Electricity Regulatory Commission is currently hearing disputes between consumers and private companies Tata Power and Adani Power over viability of rates from their two 4,000-Mw projects.