People’s Democracy (Weekly Organ of the Communist Party of India (Marxist)

Vol. XXVIII No. 27 July 04, 2004

Privatisation
In Power Sector Imposes

High
Costs On The Citizens

 

Prabir
Purkayastha

 

THE
failure of restructuring of the electricity sector and the privatisation of
erstwhile DVB are now becoming clearer by the day. It has imposed very high
electricity costs on the citizens, as shown by the recent steep 25 per cent
overall increase in tariffs declared by Delhi Electricity Regulatory Commission
(DERC), without improving the quality service. Frequent and prolonged power
cuts, high losses, inefficiency of operations, innumerable billing problems have
now combined with very high tariffs, one of the highest in the country. The
outflow from the state exchequer for providing subsidies after privatisation is
far higher than the losses of DVB earlier: in two years, the Delhi government
has provided a subsidy of more than Rs 3,500 crore in the name of power reforms.

 

The
cost of electricity per unit in the Capital (including purchase and supply cost)
comes to 505 paise per unit, a result of the restructuring it carried out by
which the Transco has no generating capacity and has to buy out its entire
power. This is the highest cost that any SEB has for supply of electricity in
the country. The T&D losses are in the region of 45 per cent, and this along
with the high cost of purchased power, is the cause of this exorbitant cost of
supplying power to the Delhi consumer. The electricity tariff for industry in
Delhi is now more than twice that of Canada and the US, and only below that of
Japan amongst the advanced economies.

 

 The
recent CAG Report has also shown how during the privatisation exercise the Delhi
government favoured the private parties – BSES and Tata Power which finally
impact the consumer tariff and the outflow from the state exchequer. For the
Delhi government now to show unhappiness with the private distribution companies
is hypocritical as they disregarded all earlier criticism of the privatisation
measures. We and other critics had pointed out the failure of privatisation in
Orissa involving precisely these two parties. The Delhi experience reads no
different from the Orissa experience showing that the Delhi government learnt
nothing from this and has inflicted the same ruinous policies on the people of
Delhi.

 

The
citizens of Delhi in JJ clusters, involving 30 per cent of Delhi’s population,
continue to be discriminated with complete criminalisation of their electricity
supply using the thekedar single point delivery scheme. The thekadars
are charging arbitrary rates, and quite often abscond after collecting money
from the JJ colony residents and not paying the distribution companies. Neither
the Regulator nor Delhi government has made any effort to redress their
problems.

 

RECENT
TARIFF HIKE 

 

The
tariff increase this year alone, after taking into consideration the withdrawal
of subsidies, is of the order of 25 per cent and not 10 per cent as claimed by
DERC and Delhi government. And this increase comes after successive increases by
DERC in tariffs in Delhi, which were quite high to start with. Those consuming
below 100 units will be hit even harder, the increase in tariff for them being a
whopping 33.33 per cent.

 

DERC
has also clubbed categories of consumers from originally four to three-merging
the lowest category of 100 units with the next highest one. In all this, the
low-end consumer has suffered a higher rise in tariffs then other segments of
consumers. For consuming 200 units now, (the bulk of Delhi consumers draw less
than 200 units) the increase in their total bill will be Rs 490 instead of Rs
390 earlier, an increase of more than 20 per cent. While the Delhi consumers
continue to suffer under repeated power cuts and savage hikes in electricity
rates, the private companies are being given special incentives with guaranteed
return on equity of 16 per cent amounting to hundreds of crores, and relaxation
on the reduction of losses, the supposed basis of privatisation. To compound all
this, the Delhi electricity regulatory commission (DERC) has admitted that BSES
has spent only 146 crore for improving the system out of the sanctioned amount
of Rs 761 crore. Despite this, DERC has agreed to enhance their budget on this
head to Rs 1,100 crore. The question that we need to ask the regulator is why
has this amount not been considered as a rebate for the consumers who have
already paid this amount through the high tariffs? What steps has DERC taken to
see that the private distribution companies do not siphon off unspent amounts?

 

Comparison
of Current and Earlier Domestic Tariffs

 

JJ
COLONIES AND THE SINGLE POINT SCHEME

 

It
is estimated that thirty per cent of Delhi’s population is living in JJ
colonies. These sections have been denied access to proper electrical
connections on various pretexts and were put under single point connection
scheme of the erstwhile Delhi Viduyt Board. The contractors have taken and
continue to take arbitrary amounts for providing connections. The meters are
faulty and there is over charging of the consumers. The contractors collect dues
from the consumers and do not pay the distribution companies leading to
disconnection. The contractors quite often abandon their consumers and who then
may be asked to pay a second contractor or the distribution companies, therefore
incurring recurring development/installation charges.

 

Once
distribution was privatised in Delhi, the private distribution companies: BSES
(now Reliance Power) and Tata Power were entrusted with the responsibility for
all such schemes of DVB as DVB’s legal successors. 
DERC, in its order dated March 26, 2004 had fixed a development charge of
Rs 2,400 for providing connection out of which Rs 1,200 is to be borne by the
consumer in JJ colonies for non-electrified JJ colonies. In spite of this, the
March 26 Order of DERC is being misused by the private distribution companies
who are demanding an additional Rs 1,200 from the consumers in the JJ Colonies.

 

CAG
REPORT ON PRIVATISATION

 

The
CAG Report for the year 2002-03 on the Delhi government has substantiated what
the CPI(M) had pointed out earlier. The most important observations in the CAG
Report are as follows:

• The
  amount that DVB had outstanding differed by a massive Rs 3,107 crore leading
  to a serious under valuation of DVB

  
  

• The
  target for loss reduction figures were diluted to 1.16 per cent per year as
  against 3 per cent per year, that is only 5.8 per cent in five years as
  against the original target of 15 per cent

  
  

• Changing
  the scope of the tender after receiving bids

  
  

 

One
of the causes of high tariff in Delhi is high level of theft and technical
losses. It is clear that the private distribution companies and the Delhi
government acted in collusion to maintain the current high theft regime imposing
heavy electricity rates on the consumers.

The
restructuring and privatisation exercise for Orissa earlier and now Delhi shows
that the electricity reforms have taken a wrong path. The entire exercise that
privatisation of distribution and encouraging independent private power
producers in generation did not improve supply and bring down costs. This has
shown the privatisation exercise to be bankrupt. Both Delhi and Orissa have very
low agricultural demand, so subsidy to agriculture cannot be trotted out here,
as is the usual excuse for the failure of the electricity reforms. Injecting
high private cost and handing over state assets at a pittance to private power
companies obviously help private capital. It has only added to the woes to the
consumers through exorbitant power tariffs, which are now one of the highest in
the world.