Prabir Purkayastha’s submission to DERC, 2001

Please refer to your Public Notice regarding the Application filed by Delhi Vidyut Board for Tariff Increase. We give below our views on the same for your consideration.


  1. The Delhi Vidyut Board has currently submitted a proposal to the Delhi Electricity Regulatory Commission (DERC) for an upward revision of the power rates. The increase of rates is to cover its operating losses currently running around Rs.1000 crore.


  2. The DVB admits that its high losses are due to huge Transmission and Distribution losses, which are currently running around 50%. This figure has risen from 22%, which it was in 1992-93 to this level within the last few years. Thus, as DVB is unable to control theft and the Delhi Government has little political will to punish defaulters and collect revenue, the honest electricity consumer is being penalised. In its computation, it has taken only a two per cent rate of reduction per annum in T&D losses, which is unacceptable.


3.      We agree as a tariff guideline that in the long run, electricity prices should cover the true costs of delivering electricity to the consumers. The true costs could include a return on investment to get a viable delivery price. But they must definitely not include ”avoidable” costs such as losses due to theft, uncollected dues, technically preventable T&D losses, etc. After all, why should consumers subsidise the managerial inefficiency and technical incompetence of the electricity supplier? Therefore, for computing the true price of electricity, the avoidable losses cannot be included.


  1. The figures shown as future losses are also high, as DVB has assumed unrealistic figures for the growth of demand. With shutting down of industries due to relocation, the demand figures for 2001-02 will actually be much lower than projected.


  2. The Transmission and Distribution Losses are primarily occurring due to industry and well off colonies stealing power. The low-end consumer cannot be penalised for such thefts by increased tariffs. It has now been shown by DVB’s own internal studies that the bulk of the theft of electricity in Delhi is not from the poorer sections. Thus, to burden them with such increases, as proposed  by DVB, is wrong.


6.      If this were not enough, the current proposals seeks to increase the rates of the low end consumer by the highest amount – a whopping 200% over the current rate while increasing charges of the high-end consumer the least. We give below our calculations to show the deeply anti-poor policies that the Delhi Government and DVB want to follow.

Table: Impact on Proposed Changes on the Bills of the Consumer

Categories Connected Load (Assumed) Existing Proposed

Consumer Bills

50 1 KW  50 1.00 150 1.75 50 150 200%
100 1 KW  50 1.00 150 2.50 100 250 150%
200 3 KW 180 1.75 450 3.00 275 550 100%
400 5 KW 300 2.50 450 4.00 775 1350 74%
600 10 KW 600 3.00 900 4.50 1375 2250 64%
800 15 KW 900 3.00 1350 4.50 1975 3150 59%
  1. We submit that the tariffs for the low-end (below 200 units) consumer should not be increased for failures of DVB and theft by more well off sections and the industry.


DVB has also submitted tariff determination principles for 2002-2006. We submit that these should be de-linked from the current exercise that should focus exclusively on the tariff increase for 2001-02. The tariff principles for 2002-6 have important issues that need to be addressed separately. This is particularly as DVB is proposed to be privatised. We also submit that the privatisation scheme should be after regulatory scrutiny. Unless, there is public scrutiny of the restructuring and privatisation proposals, tariff principles have no meaning. According to experts, the cost of such privatisation will be to increase the rates by a further 75% to the increases proposed. The people of Delhi will not be able to pay for this high cost power.  The impact of Orissa restructuring and privatisation of generation and distribution has led to


    1. High Tariffs due to re-evaluation of the assets before privatisation and consequently the capital servicing charges starting again


    2. All losses being carried by the state owned Gridco, losses that are currently higher that the losses to OSEB earlier


    3. Outstanding bills of Rs.450 crore run up by the private generating companies to the state owned Gridco


    4. No improvement in either lowering Transmission and Distribution Losses or in increased revenue realisation.


  1. Unfortunately, in applying these bankrupt policies to the state will only lead to very high rates for power without any possibility of reducing outflows from the state exchequer. The recent separation of generation, transmission and distribution, is unlikely to lead to any improvement in the performance of these entities. Private companies will only take over the distribution companies if all the current losses are borne by the state, power is given to them at assured prices and the assets are transferred virtually gratis. The Greater Noida private power company has done precisely this. It is getting power from UPSEB at subsidised rates (Rs.1.40 per unit against UPSEB’s cost of supply of Rs.2.00), collecting high tariffs while running up Rs.180 crore of unpaid dues to UPSEB. Inviting in IPPs to generate power will also mean very high cost power being provided to Delhi and lead to similar problems now being encountered in Maharashtra.


  2. We also would like to address tariff issues not covered by DVB. DVB has created two kinds of consumers, one set in well off colonies, which it caters to directly, and another set that have been handed over to private contractors. The private contractors in these colonies are:


    1. Arbitrary installation and meter charges


    2. Arbitrary electricity rates


    3. Minimum charges


    4. Disconnection completely on the whims and fancies of the contractor.


  3. There is complete criminalisation of the electricity in these colonies. The consumers are not only paying higher rates, they are also being black-mailed as the private contractor controls their electricity supply.


  4. We submit that under the Delhi Electricity regulatory Act, all these fall within the purview of the Regulator. The Regulator must direct DVB that it cannot create two class of consumers and must provide same facility to every consumer irrespective of where he or she lives in Delhi.


  5. The current power policies being followed by the Delhi Government have been able to address neither the problems of shortages of supply nor provide power to the people at affordable rates. The last one-decade has seen the average rate of power rise from Re.1.00 to Rs.2.50 while losses and shortages continue. The financial crisis of the DVB has increased even more in the last five years. Instead of addressing the real issues of the power sector – providing adequate good quality power at affordable costs – the government is talking of ‘unbundling’, ‘restructuring’ and ‘competition’ and a sharp rise in tariffs. Such measures, instead of strengthening the basic infrastructure in the power sector and focussing on the efficient use of existing resources, will only lead to a California type melt down of the system, endangering the economic and political stability of the country.


  6.  The Delhi Government is also trying to induct Independent private Power Producers for Delhi. A stock taking of the Independent Power Producer (IPP) route and fast track projects will show that it has failed completely. The three fast-track projects that have come on-line have taken more than 7 years to start. As the Enron case has shown, the cost of such IPP power is bankrupting the State Electricity Boards (SEBs). The capital costs have been grossly inflated for these projects and most of the capital costs have been met from loans advanced by public financial institutions. The foreign exchange outflows are 30 times the inflows. Thus, none of the premises of the policy for promotion of IPP projects have been fulfilled. Instead, viable boards such as MSEB have been rendered bankrupt by imposing Enron like projects on them. It is instructive that in the same period that the Government was focussing on IPPs, National Thermal Power Station (NTPC) has added 10,000 MW, all of it without any budgetary support.


  7. Instead, the DVB and the Delhi Government must chalk out a crash policy of how to bring down losses. In this, it must involve the workers and other employees in such schemes and not use them as scapegoats. It is well known that the big defaulters and those stealing electricity have political patronage and that is why thefts have increased sharply. These losses can be brought down in two to three years to the 20-22% level that it was before these so-called reforms started in the electricity sector. Secondly, instead of chasing high cost power, it must negotiate with NTPC to set up dedicated power stations for Delhi. Instead of privatising, it must focus on how to bring the distribution companies to health. Any increase in rates, if required, must burden the low-end consumer the least.


  8. The Delhi Government must also share with the people of Delhi the impact of privatising of the transmission and distribution companies on current power rates in Delhi. We call upon the Delhi Government to take note of the serious situation that will develop if such sharp rate increases take place. It is time that the Delhi Government looks at the power policies from the people’s point of view and not with the objective of privatising the power sector, irrespective of its costs to the consumer.


  9. Immediate taking over of distribution from private contractors who are fleecing the public.


  10. Immediate replacement of faulty meters and black-listing companies supplying faulty meters. It is now known that 90% of the new meters being supplied for the last five years are faulty. It is not clear how these companies have been allowed to continue such supplies even when their supplies are known to be faulty.