Delhi Power Distribution privatisation - a model for all cities to follow?

@ Syedbhai

The government's direct delivery mechanisms have largely failed, or, if you want to be more charitable, you may say 'under-performed'. And, the biggest sufferers of such under-performance by government service providers, particularly when they are monopolies, are the poor, since they cannot afford the alternatives (which however the rich can find ready access to, as also find ways to pass on the consequent additional cost burden) - so, you have the gensets/ inverters/ converters/ batteries/ UPS's in case of poor quality power supplies; borewells/ tanker-water, etc in case of poor water supplies; cars/ mobikes/ autos etc in case of poor bus services; private clinics/ hospitals as compared to ESI and government hospitals; private schools as compared to government schools, and so on.

There's absolutely no gainsaying the fact that supplies of essential goods and services to large sections of the public need to be subsidised. But, the question is of how best to achieve it. Many eminent economists, including Lord Meghnad Desai, Kaushik Basu, Swaminathan Aiyar, and a host of others, have suggested the "coupons" route, amongst others (debates on PRAJA, on each of the segments of which, can be accessed here), which seem to make far more sense than the present direct delivery systems of the government. And, the neta-babu combo's in many states are finally beginning to adopt them, realising that they can't keep fooling the people forever, even as such combo's in many other states are desperate to retain the status quo, not wanting to give up on the vast vested interests that it serves, so easily - check this out for the latest.

With deliveries, by private players, becoming far more efficient, the poor (identified in a transparent manner) will enjoy better services at affordable prices, and the exchequer will be burdened to a far lesser extent too. The consequent savings to the exchequer can perhaps be used for affording more concessions to the poor.

Comments such as you have made will certainly convey a picture of you as being pro-poor, like the typical neta-babu combo's are wont to convey. But, if you genuinely want to help the poor, which I am sure you do, it would help a lot if you could instead demand efficiency, which, whether you want to admit it or not, is antonymous with government service provisioning, with of course the rare exceptions.

Government has a very important role to play - as the facilitator, regulator, and at times as the controller. And, for this, you need quality people, who you can afford by getting out of areas where you don't need to be, and down-sizing thereof - check this.

Talk of ENRON, failed systems in California, etc, have to be seen in their context. May be you could start a blog on why the California arrangement failed even as those in Ahmedabad, Surat, Greater NOIDA, Kolkata, Mumbai, etc have worked very well all these years, and now Delhi is all set to join them fully, if it already has not. May be the Californians can derive some lessons, or the TATAs, Ambani's or Torrent's can take them over.

Putting things the way you have done, I am afraid, is only going to be providing alibis for those perpetuating their vested interests.

Exactly. And, who is supposed to keep a check on the private sector from indulging in such practices? It's the government, through regulators, amongst other mechanisms. But, when the government agencies themselves are breaking all rules and involving in scams of every kind, the regulatory mechanisms lose their effectiveness, and then it becomes a free for all.

More and more, the the public sector has become the vehicle for pursuing the personal agenda's of babu-neta combo's (railway projects in West Bengal, whether feasible or not, when the minister is from there; our own poorly conceived TTMC's; AIR-INDIA - there's no end to the number of scams there, etc) than serving any useful purpose. In fact, on the other hand, they are causing serious damages to the proper growth of the economy.

Excerpts from an interview of Mr S L Rao, arduably the country's foremost energy expert, and first chairman of CERC, published in ToI. For the full text, click here.

New Delhi is the best example where Sheila Dixit handed over power distribution to two private players: Reliance and the Tatas. The net result: the Delhi government has been able to save Rs 20,000 crore - - - . Today, New Delhi is the only city after Mumbai where one does not use stabilizers or inverters as there is 24x7 power supply.

The power sector should be run by managers, not bureaucrats. The state has spent Rs 3,847 crore to buy power since 2010. Power purchase is like buying shares on the stock exchange where brokers are following the rise and fall of scrips. We have power experts who keep tabs on the rates in the energy market. Here, power trading is done by IAS officers.

Retired IAS officers are being appointed to head commissions and most follow diktats of local politicians. Retired bureaucrats prevent state governments from revising tariff, by disallowing legitimate costs from going up, and cause revenue loss.

Retaining the status quo will amount to nothing less than criminal negligence now that the way forward has been established. There will be marginal increases in tariffs and resultant costs. But, the savings due to lesser dependence on standby arrangements, due to much improved quality, will more than offset those cost increases. Perhaps it's time the civil society joined together in demanding true reforms along the lines of the Delhi model.

On electricity, Dr. JP said that the Andhra Pradesh Electricity Regulatory Commission has become a branch office of the Government and failed to discharge its statutory responsibility of ensuring Discoms (distribution companies) are in good health. A Government which has neither money to reimburse Discoms for the subsidies it offers to various sections of people nor courage to raise tariffs did not submit the annual certificate on the health of Discoms in earlier years. The APERC which had winked at Government failure now permitted Discoms to burden consumers with fuel surcharge for power consumed in earlier years. How could industrialists pass on the increase in costs for goods manufactured in previous years now, Dr. JP asked.

Dr. JP accused the Government of indulging in hypocrisy by claiming to attract investments worth lakhs of crores of rupees and provide jobs to tens of thousands of people even as it turns existing industries sick by starving them of power. The traditional parties continue to pursue bankrupt policies which will ensure darkness in our houses, and unemployment for our youth. Lok Satta has demonstrated what could be done by sensible management of power sector about a decade ago. In Kallacheruvu, in West Godavari district, Lok Satta franchisee managed a feeder line and saved 19% power, eliminated corruption, improved quality and showed the way of ensuring 24 hour power in all villages.

In reply to a question, Dr. JP said gas allocation for power generation has become a cash cow for those in power at the Center and in States.

For the full text of Dr Jai Prakash Narayan's speech, click here.

Same story in most states. And, the solutions are pretty straight-forward too. Besides, it is good politics - only it needs to be seen that way. Perhaps there's a role there for the civil society.

Mr S L Rao who is quoted to buttress the privatisation in Delhi, is not all above board (to put it mildly).  He fails to note that he is on the Board of Directors of Reliance Power as he praises the Delhi model.  Blatant conflict of interest.

Because Mr S L Rao is a director on the board of Reliance Power, does not mean he can't air his opinion on power reforms. Now, there can't be much of an argument over the fact that efficient grid power supply greatly reduces the burden on fuel (and, thereby the impact on the environment), finance and other resources, compared to the dependence on the conventional alternate sources (like the genset). So, campaigning for something that's in overall public interest, even when you have a personal interest in the vehicle that's bringing it about, can no longer be treated a vested interest.

I don't know of any period when power was in private hands in Karnataka.  So it is surprising when Mr S L Rao  notes that Karnataka 'used to be the best'.  How can that be?

Apparently, Mr S L Rao was nostalgically referring to Karnataka having always been in the forefront of power development in the past - Bangalore being the first city in the country to have organised power supply (from the Shivasamudram hydel station) etc. The situation was a lot different then, of course. Today, it's clearly seen to be beyond the government's capacity.

The mistake he says Karnataka made is not 'not privatising', but allowing a single bureaucrat to head all the unbundled activities.  So maybe privatisation is not the only option?  Just saying.

Convenient way of looking at it.

Does Mr Muralidhar Rao have any conflicts of interest?  First a unattributed PPT praising the Tata company NDPL.  Secondly he notes that he is in touch with the Tata officials.  Some information throwing light on this aspect would be welcome.

When I made the opening post, it didn't occur to me to mention my source for the data provided. But, in reply to the very first response itself, I posted under the caption 'welcome feedback' - "The source is TATA power itself. So, the feedback from Delhi residents is most welcome, and essential as part of the process of making them accountable. And, that's exactly how we can perhaps use PRAJA as the interface between the consumers and the service providers, and help make things better for everyone. And, do forward this to all the citizens of Delhi you are in touch with".

Besides, I forwarded the link with the deliberatively provocative caption "Delhi Power Distribution privatisation - a model for all cities to follow?" to a whole host of JNU (arguably the country's foremost adda of Socialism) 'intelligentia', whose mail IDs I have with me, apart from many others through Yahoo and Google groups, and directly even, inviting them all to take up the debate if they wished to. I also sent the link to PRAYAS (in Pune - arguably the most knowledgeable group in the country on power issues). Though such invitations have received fair responses in the past, this time around, the responses were rather poor, with hardly any that can be termed critical. So, I concluded that was corroboration of my overall view.

And, for all that, when the likes of Mr pdk choose to suspect my motives, it plainly becomes a reflection of some problem they suffers from, I guess. And, talking of vested interests, the question that arises is 'is Mr pdk in some way involved with the genset/ inverter/ converter/ battery/ etc etc lobby; or the electricity board union/ power theft mafia?'.

Yes, I am in touch with TATA officials, as also of Reliance. I worked my way to reaching out to them to see "if praja.in could become the interface between the consumers and the service providers, and help make things better for everyone". If they were in Bangalore, perhaps, it could have happened already. We in PRAJA have likewise been pursuing with Mr Manivannan, MD BESCOM, too - check this.

When TATAs in Delhi increased their customer base from 700,000 to 1184,000, without any kind of discrimination whatsoever (anybody could have seen that I had missed out the zero's, if required by looking at the ppt presentation; but, you would choose to score brownie points even there - anyway, I have since effected the correction), if such instances have occured in Mumbai, there must be some peculiarities there.

I have extracted below excerpts from two ToI reports to highlight the pangs the Delhi "aam aadmi" are seen to be suffering from because of the changed regime, where they are now required to pay the actual costs:

Report 1: Two weeks after announcing his plans to confront the Delhi government on inflated power bills, activist-turned-politician Arvind Kejriwal and his team restored electricity connections of two households on Saturday. In both the cases, power supply was disconnected against non-payment of bill.
    
Kejriwal kick started his ‘bijli-paani’ campaign early in the morning by restoring electricity connection of a labourer Bana Ram’s house in Tigri Colony, Khanpur. Ram’s power supply was disconnected on Friday morning against non-payment of bill (dated September 12) amounting Rs 15,166.
    
Ram, who lives in a cramped two room house with a barsati along with his two sons and three daughters, claimed that he missed the due date to make payment as he could not arrange for money. “In August, I paid a bill of Rs 10,000 after borrowing money on loan. This time I did not know how to manage it,” said Ram (70), a construction worker who earns between Rs 7,000 to 8,000 per month. His house has three air coolers, two fans, a refrigerator and four TV sets.
    
For the full report, click here

Report 2: However, discom sources say that on Friday, the day Chand died, they were undertaking a routine mass inspection in the area to detect power-theft. "On inspection of Kailash Chand's home, the electricity meter was found by-passed and a power theft of around 5KW of power was detected at the premises. Subsequently, according to DERC guidelines, the electricity of the premises was disconnected," said the source. The billed amount at Chand's house was Rs 550, which the discom claims was because of the meter being by-passed.

- - - Bachi Devi said her struggle for a meter had been on since 2008. "We pull in the wires for the connection. At times we pay Rs 200 to a local guy. However, the power is disconnected every time on the ground that we are stealing power," she said.

- - - Discom official said, "Najafgarh accounts for almost 45% of power theft. Regular enforcement inspections are conducted and people found with tampered or faulty connections are booked."

For the full text of this report, click here.

In Mumbai, even Dawood Ibrahim's henchmen living in Dharawi and Sena bigwigs of Matoshri have from long gotten used to paying bills raised by the same Ambani company well on time. Apparently, the Delhi lot have gotten used to the theft culture under the government dispensations from long, and it is taking time for them to accept the realities.

Yes, there perhaps are some questions about the way the regulatory authority has handled the Ambani company's claims at the time of tariff fixing, and being a finance man, one would have expected Arvind K to take up issues the DERC. But, having joined politics, I expect he now finds these ways bring him more into the limelight.

It is inevitable that the citizens of Bangalore as also other cities will have also to go through these change pangs in the not-too-distant future. The earlier it is done, the lesser will be the impact. But, as far as the proper bill paying consumer is concerned, the additional costs will eventually balance out because of better quality of supply and lesser dependency on the much costlier genset power, therewith.

Here is a report from Business Standard which seems to question the neutrality of the regulator.

And, here is a report from today's New Indian Express, which amongst other things says "KERC had announced an average 13 paise hike across consumer classes as opposed to a hike of 73 paise proposed by BESCOM in April. In October last year, the KERC had announced a 21 paise hike as opposed to a demand of 88 paise by BESCOM".

So, even the government-owned BESCOM, with none less than the redoubtable Mr Manivannan at the helm, has been asking for fairly substantial tariff increases. As such, we all need to accept that these utilities cannot continue to be operated the way they have been all these years, and for that, we need to be paying higher tariffs. But, when the regulators (mostly ex-bureaucrats) choose to play to the galleries, and allow just some 10 to 20% of the increase demanded, a BESCOM can possibly continue operating, with its borrowings being backed by government guarantees, but not the private operator.

It is very likely that Mr Brijendra Singh, former chairman of the Delhi Electricity Regulatory Commission (DERC), quoted in the BS report is one such bureaucrat - I am only guessing.

What is necessary therefore is more objectivity and transparency in the functioning of the regulators, which can perhaps happen with the induction of at least one qualified person (like Arvind Kejriwal) from the civil society in each of the regulatory bodies.

Following a rigorous and thorough assessment process by the Department of Sustainability, Environment, Water, Population and Communities, Australian Federal Environment Minister Tony Burke announced that the GVK’s Alpha Coal Port Project at Abbot Point has been given a go-ahead.

- - - G.V.K. Reddy, Chairman, GVK, said: “This development is yet another milestone towards our goal to be the premier, most reliable coal supplier to the world enabling better lives". - - "We are the only coal developer in Australia to possess environmental approvals at a state and federal level that integrate the mine, rail and port, bringing to finalisation the Tier One environmental approvals that will significantly assist in the facilitation of opening up of the Galilee Basin. Importantly, we believe the overall assessment process has resulted in best practice environmental protection outcomes which we support wholeheartedly,” he said.

For the full report in the Business Line, click here.

This only goes to show that Indian Corporates can meet any kind of challenges, whatever the conditions, whoever the competitor, as long as the game is played on a level field. The Australian government stpulates stiff conditions, and the Indian company meets them. The Indian government leaves the conditions all very vague, so as to play favourites at the deciding stage, and we all land up in a soup. So, the problem clearly is with the government.

The Bengaluru/ Karnataka situation:
On Monday, the Udupi Power Corporation Ltd (UPCL) shut down generation at one unit of 600 MW citing coal shortage. In January, UPCL had stopped generation in both its units citing coal shortage and the issue was resolved temporarily with the Chief Minister’s intervention. However, electricity supply companies (ESCOMs) owed UPCL upwards of `1,400 crore in January and efforts have been on to settle the bills. UPCL was locked in a battle with ESCOMs  over tariff.
(for the full report in the New Indian Express, click here).

The New Delhi scenario:
Meanwhile, State Power Minister Haroon Yusuf said Delhi was the only state which had 24x7 power. He further stated that the power deficit here was just 0.1 per cent whereas in Madhya Pradesh it was 3.5, Karnataka 14.9, Bihar 21.0 and Jharkhand 6.8 per cent. Prior to the privatisation of the power sector, the state had witnessed violent demonstrations over power cuts that lasted for several days.
(for that report again from the New Indian Express, click here).

The Aam Admi party has alleged irregularities in the tariff fixing exercise in Delhi. While this has been contested by others, apparently, all is not quite well with the functioning of the regulator, and it certainly could do with some tightening up, which is perhaps where the Civil Society's concentration should be, as compared to AAP's politicking.

In contrast to this, in Bangalore however, the problem is perennial, inspite of having the redoubtable Mr Manivannan as the BESCOM MD, since he just can't do a thing about the government not releasing the huge subsidy dues.

Isn't the way out of the imbroglio plain and simple?

@ Syed -

This only shows that there are good and bad everywhere. Private sector is not immune to that. It is self testimony that privatization doesn't necessarily means everything will be alright

Is there a need to say that, again and again?

It is also a pointer to establishment of regulatory or supervisory body infrastructure before a sector is privatized

This is another fallacy you keep repeating. The TRAI had been set up well before the telecom sector was opened out to competition from the private sector. But, for all of that, a A Raja comes along and messes up things by bypassing the TRAI. And, it was largely the rivalry between the strong players in the picture that led to the entire scam getting exposed. As such, opening up of the sector has to happen simultaneously with the putting in place of the regulator.

There is no end to the kind of fine-tuning of the framework that you can do; but, there will still be the gaps. And, when you do it in a vacuum, the gaps will be just bigger. These can only be filled based on learnings while in operation. This is what mature regulatory bodies like SEBI, RBI etc are doing on a regular basis. Initially, they too had floundered.

I hope I'll not have to go on repeating these.

Now, when a system that had been run down for decades together, requires to be upgraded, you need to bring in lots of funds. And, these funds have their costs, which need to be recovered, and hence the tariff increases. All the same, since this is a natural monopoly area, apart from its having certain social impacts (unlike say a hotel industry), you have the regulator. If he is found wanting in his functioning, please make an issue over it.

Whatever, for all of the Delhi discom tariff increases, I expect they are still comparable to those of BESCOM, not even taking into account the effective cost to a consumer for the much higher stand-by power costs incurred.

Moral of the story very plainly is to upgrade to a robust system right away, which a Manivannan will possibly do better than even the TATA company, IF the funds are made available to him. But, it's a very big IF.

 Thanks on behalf of PRAJA to Mr Mithun Chakraborty, Sr Manager, TPDDL, New Delhi, for posting the company's official views. It is a matter of pride for us when people like him and Mr Manivannan openly post openly on our site, as also a validation of our relevance as a platform for debates, across the board.

@ Mithun C

Regulatory Asset is over Rs. 20000 Crs and needs to be liquidated through appropriate tariff adjustments.

Can you elaborate on that, please? It is a large sum.

Which works out to 57% in the last five years

The corresponding increase in "power purchase cost" (PPC) has been over 90%. And, with PPC constituting over 80% of a DISCOM's input costs, is it any surprise that you have to have such levels of tariff hikes?

Then, the question arises as to why is there such a huge hike in the input costs. The main cost components are coal and its transportation - one handled by the government monopoly Coal India, and the other by another government monopoly Indian Railways. The answers then become very evident for those who want to see them.

Further, the regulatory asset for Delhi as a whole is Rs 20,000 cr; for TPDDL alone it is Rs 4,700 cr. How it has reached this level is explained by the following extracts from Mithun C's post of 9th June:

last tariff hike took place in FY 05-06 with a marginal 1% increase in FY 2008. Also, during the period FY08-09 to FY 12-13, the Power Purchase Costs increased by over 90% while the tariffs (including the recent hikes) have increased by only 50%. On account of this variance in tariff hikes vis-à-vis actual costs being incurred, the accumulated revenue gaps recoverable from future tariffs has increased from approx Rs 320 cr in FY08-09 to Rs 4700 cr in FY 12-13 for TPDDL.

The moral of the story plainly is to accept the cold realities as and when you are confronted with them, and to act upon them fast enough so that you don't land up overwhelmed by them later.

Also, if one is looking at tariffs, then the comparison needs to factor in the cost of diesel/ inverter generated power for the hours that grid power is not available. Haryana recently came out with an order that high end consumers wanting 24 X 7 power (against 18-20 hrs present supply) would need to pay one rupee per unit extra for their entire consumption.

A ppt on tariff vs PPC, as well as comparative tariffs across the country, including if you take into account reliability and availability of power supply, is attached to the opening post (source TPDDL).

The subject being of specific interest to me, I searched and found that TPDDL has already provided a lot of info on their web-site. Most can be accessed through the links below:
http://www.ndpl.com/
http://www.tatapower.com/investor-relations/pdf/TPDDL-ar12.pdf

Going by it all, apparently the TPDDL is doing a more than fair job, it is entrusted with, viz distribution of power. Further, considering the huge input and capex costs that have necessarily to be incurred today for providing quality power, their tariff levels can't be said to be high either; perhaps they need to be higher. So, if future tariff increases have to be contained, the answers have to be found in reducing the input costs. The biggest hurdles there are the two state-run monopolies - Coal India and Indian Railways (who transport the coal).

In Karnataka, there is the additional problem of subsidies and dues from government agencies, both of which go by the dictum of 'payable when able', if they are paid at all (check this).

No AAP or BJP is contesting the fact that privatisation of power supply in Delhi has caused to reduce the distribution losses from around 55% to around 15% now. Isn't that alone a good enough reason to adopt the model for all cities, across the country?

Apart from that is the 99.9% system reliability, meaning, I expect, you can now dispense with the gensets, inverters, UPS devices, batteries, converters, emergency lamps, voltage stabilisers, candles, match-sticks, etc.

Further, if the CAG audit justifies the tariff slashing, the additional bonus is that you are going to be getting it all at far cheaper tariff levels than earlier. Even otherwise, the increase was only marginal, particularly considering the 180% increase in power purchase costs in the corresponding period.

In the face of all of these, if there is still resistance to privatisation, it necessarily has to be from quarters harbouring vested interests.

Financial Express report (for the full text, click here):
Reliance Infrastructure spokesperson reacted strongly to Arvind Kejriwal's comment, saying "Reliance Group is extremely disappointed with the Delhi Chief Minister's tweet attacking our Group Chairman."

The BSES discoms, which are run by Reliance Infra, urged Delhi Government to "engage constructively" to find a solution to the power crisis and avoid "extreme hardship" to Delhi citizens from next week. - - "Bulk power purchase costs have increased around 300 per cent in the past 12 years, while consumer tariffs have increased only 70 per cent in the same period. DERC needs to provide cost reflective tariffs to cover this increase in power purchase costs, and recover past dues of Rs over 15,000 crore from consumers," Reliance Infra said.

"Delhi government can resolve the immediate payment crisis by providing support to Delhi Discoms to make payment to NTPC, against the security of these huge past under-recoveries, that have led to creation of Regulatory Assets of over Rs 15,000 crore," it said.

New Indian Express report (for the full text, click here):
BSES discoms, which supply power in nearly 70 per cent areas in the city, had informed that they did not have money to buy power and the city may reel under long outages if funds are not provided to them.

Critical of Delhi government, the discoms said it refused for the past 60 days to appoint its nominees to the committee directed to be formed by DERC to examine the precarious cash flow situation and take remedial measures.

"Delhi government's proposed step is a huge setback to power sector reforms, with grave repercussions for the country's future economic growth. DERC's failure to provide appropriate tariffs to cover increase in power purchase costs has led to under-recoveries of over Rs 15,000 crores from consumers," the discoms said.

The BSES discoms said the current payment crisis was result of DERC refusing to allow recovery of their past arrears.

New Indian Express editorial (for full text, click here)
Official data is self evident to justify the argument that there is little scope for lowering electricity tariff in Delhi to that extent, without a large dose of subsidy.

In the past 10 years, that is since 2002-03, the cost of power purchased by at least one of the distribution companies in the capital has increased by as much as 300 percent. To be specific, it has shot up from Rs.1.42 per unit to Rs.5.71 per unit today.

To be fair to the distribution companies, the regulatory authority approved this tariff as well after due scrutiny.

But what was the tariff hike that the consumers were subject to during this period? The answer is just 65 percent. That is, from Rs.3.96 per unit to Rs.6.55 per unit. This is lower than the 120-percent increase one has seen in the official consumer price index.

What is more, the bulk of the increase was effected in the past two years with virtually no upward hike during the five years preceding it. It is also an established fact that the city's distribution companies still have a burden of Rs.20,000 crore in un-recovered costs by having to sell electricity at below cost in the past.

One has to give credit to the distribution companies that they have managed to stay afloat despite being subject to scrutiny and pressures from the state government and the sector's watchdog. It is also credit-worthy that they have also initiated some quiet reforms in the system without much of a hue and cry.

One is referring to the effort that has gone into plugging the leakage which, for long, power distribution utilities were referring to as technical and commercial loss, even as everyone knew it was a euphemism for theft-some of it by the so-called "connected" people who could not be touched.

One of the distribution companies, BSES, says they managed to plug this loss by an impressive 40 percentage points-from 57 percent at one point of time to around 17 percent now.

Therefore, rather than burden the state's exchequer, distribution companies have actually made it richer, if one considers the opportunity cost-as the state would have otherwise had to compensate them for the loss in the form of subsidy.

One is not sure how the previous regulator in 2010 claimed that there was scope to reduce the power tariff by around 23 percent. Even then, the AAP has resorted to a very simplistic calculation while claiming there is scope to cut tariff by 50 percent.

Just on the basis of a hypothesis, it feels that if the tariff was not hiked in 2010 and subsequent increase were to be rolled back, the power tariff in Delhi would have been 50 percent less. This argument is poorly founded for the simple reason: Why has the hike resorted to by the generating companies not been taken into account?

Residents of Delhi today are much better off than they were some 10 years ago in terms of getting assured power without periodic cuts, especially in summers. It is equally noteworthy, especially in an energy-starved country like India, that much of this has been achieved by plugging loopholes than drawing more proportionate power from the grid.

If the new government in Delhi feels the residents are being much burdened by high power tariff, it is best if its representatives and those of the distribution companies sit down together to find solutions than posturing or adopting confrontationist approaches. This is the only practical way forward if the intention is the interests of consumers and not indulging in cheap politics.

I find it difficult to believe that Arvind Kejriwal, an IIT graduate, can't comprehend this sound reasoning. The conclusion is that he is playing politics. He's not going far this way.

Delhi has been suffering outages after the May 30 storm damaged all the three feeder lines that wheel power to the Capital. The lines have been operating partially as repair work is on in full-swing.

Gujarat, Madhya Pradesh and Chhattisgarh— all BJP-ruled states— had offered additional power to Delhi as demand spiked to about 5,800 mw due to soaring temperature. But the transmission company was unable to draw this power due to capacity constraints of the feeder lines.

For the full reoport in the ToI, click here

On their part, the power companies claimed to have been working on a war footing to restore supply. "There was major loss of supply from extra high voltage northern region lines feeding power to Delhi on Friday due to the thunderstorm. A number of 400kV, 220 kV, 66kV, 33kV and 11kV high tension lines also tripped. Delhi was drawing around 5,150 MW and load fell by around 4,000 MW within an hour," said a senior Transco official.

For that report, of 1st June, in ToI, click here

Through these times too, the TATA (TPDDL) company performed relatively better, as the following report excerpts indicate:

Areas under Tata Power Delhi, especially north Delhi, experienced power cuts for a couple of hours on Saturday night (9th June - full report in ToI, here).

Power department officials said no loadshedding was reported in areas where power is supplied by Tata Power Delhi Distribution Ltd (11th June - full report in ToI, here).

So, even as the privatised distribution network has largely become capable of handling emergency situations, the transmission network management handled by the government is found wanting in capacity. But, that's a relatively simpler matter, that can be tackled fairly easily by the government-owned Gridcos, and as such, wouldn't necessarily warrant their privatisation.

But, the need for privatisation of distribution has become even more imperative.
 

The AAP - LG stand off originated over the issuance of "letters of comfort" to the Reliance discoms' banks, by the government (it is a 49% shareholder in both), against the huge monies owed by them to the discoms.

Now, AK's election strategy was to paint the big business houses as the villains, who totally controlled the government. The aam aadmi mindset, fed on decades of Nehruvian Socialism, readily gulped it all down too, with the the past shenanigans of business houses like Reliance helping to add to that sentiment.

AK & Co have more specifically been alleging wrong doings by the Reliance discoms (not a word has been said against the Tata company, and not a word in favour, either), which they promised to expose through a CAG audit, immediately on gaining power. Now, after 100 days in power, a "report card" released by them lists "performance audit of power discoms by CAG" as "partially implemented". Apparently, there's not enough there to nail Reliance, since otherwise one would have expected them to be tom-tomming it all over town.

If that's indeed the case, then they owe the Reliance discoms all of the Rs 20,000 cr odd accumulated under the "regulatory assets" head (which is essentially postponed payments and interest thereon), non-clearance of which has been badly crippling the discoms' operations. In such a scenario, making allegations against a senior official, who recommended issuance of the "letter of comfort", of being a stooge of Reliance, is nothing short of blasphemy.

Besides, what is called for immediately is to raise the tariff levels (perhaps more so at the higher consumption levels, where the resistance may no be too high considering the better quality of supplies, leading to lower dependence on far costlier genset and such alternate arrangements) in order to wipe out the huge backlog. However, this goes against AK's talk of reducing tariffs, and thereby the dilemma, and, to cover it all up, the drama.

Their approaches, to some basic issues involved too, are rather quixotic, one needs to add. They are, for instance, talking of setting up a captive thermal power plant in Delhi, even as Delhi is rated as amongst the most polluted cities in the world. Besides, a white paper published in their own web-site (accessible here), had clearly identified the route to containing power costs as to source bulk power from UMPP (ultra mega power projects)'s in the private sector, than from NTPC. Of course, this will call for timely payment arrangements, which perhaps they don't quite believe in, and hence the rejection of that option.

The approaches to other issues too, as seen from their "report card", are indicative of a staidness which will not quite help given the enormity of the challenges faced. As such, while there is indeed some merit in the argument for more powers for the elected government, one can't help but go by the charge that AK & Co are more on the lookout to cover up their incapacity to live up to the tall promises made to the electorate.

So, while admittedy, it may be too early to judge them on issues other than power, in the case of power, it may be a case of an undoing of a good model.

Following are the excerpts (in italics) from a blog in the ToI, by Mr Pyaralal Raghavan, a Senior Asst Editor, with the ToI (full text may be accessed here1), and an obvious AAP sympathiser (rather, admirer), and my response, para-wise:

Delhi chief minister Arvind Kejriwal seems to have finally managed to shut up his critics and earn new laurels by pushing the Delhi Electricity Regulatory Commission (DERC) to desist from its regular annual hikes in electricity rates for the first time in many years. His continuous efforts to focus on more efficient management of the distribution network and reduce leakages seems to be finally paying off.

Delhi's privatised discoms had already achieved efficiency levels, even comparable to the best in the world (reliability levels of 99.9% - for the rest, check the opening post), long before Arvind Kejriwal came into the picture. If at all any body is to be credited for this, it should be the Sheila Dikshit government, who took bold to go ahead with the privatisation idea, even in the face of every kind of obstacles put up by the well entrenched mafia, as well as the pseudo-Socialists.

- - - But what is best about the new tariff orders is that Delhi power consumers can now even expect a further lowering of the electricity prices. This is because the new numbers show that the outstanding owned to the distribution companies, called regulatory assets in technical parlance, has suddenly dropped sharply by Rs 2000 crore this year prompted perhaps by the closer scrutiny of accounts by the stakeholders including the government which has successfully persuaded the CAG to audit all distribution companies for the first time since their inception.

The cause for the high tariffs (however, still lower than that charged by most government-run DISCOMs in other states), inspite of the improved performance efficiency, was well known as arising from the high power purchase cost (PPC), which constitutes over 80% of the DISCOMs' input costs, over which the DISCOMs had very little control. This had been commented, upon as below, in none other than AAP's "white paper" itself on 'bijli' (accessible here). "The latest power tariff orders passed by DERC throw up very important issues. The rates at which power generators are selling power to Delhi discoms varies between Rs1.2 per unit to Rs 12.21 per unit. Consider this, the newly commissioned Reliance owned Sasan UMPP bagged coal blocks by bidding to supply power at Rs 1.196/ unit. On the other hand Central PSU National Thermal Power Corporation, which have coal linkages with Coal India and which supplies about 75 percent of Delhi’s total power consumption, sells power at rates between as low as Rs 1.75 per unit to as high as Rs 6.15 per unit. Similarly, NHPC plants supplies power at per unit rates varying dramatically between Rs 1.77 to Rs 12.21. The issue is why Delhi does not have access to cheaper power and why it is being forced to buy expensive power!?".

Now, with the Central government facilitating the setting up of UMPP's by the likes of Reliance, as also opening up of the coal sector to private players, the earlier monopoly position of PSU's like NTPC, NHPC, and Coal India, has got eroded, leading to the DISCOMs' input prices becoming competitive, and paving the way for the lowering of tariffs, and simultaneous reduction of the regulatory asset account balance. This is quite in line with my comment "Eventually, that will help bring down the PPC for the DISCOMs, and the regulator can then re-structure the tariff to wipe out the regulatory asset burden in phases, following which the people of Delhi can enjoy the cheapest and highest quality (which is already the case) power, forever", made on 31st Jan, this year, accessible through the link provided in the above para.

Another major factor responsible for the turnaround is the ushering in of financial discipline amongst the stake-holders involved (more particularly the government), resulting out of the reversal of an earlier order by the Supreme Court, after the private players came into the picture (check here), leading to smoother and timely cash flow between them. In contrast, the government-owned BESCOM (Bengaluru) and its sister ESCOMS put together are paying their main supplier, viz government-owned KPCL, in 402 days on an average (ie almost 13 and a half months later - 09-10 figures; they aren't any better even now).

Apart from steady elimination of the regulatory assets the power prices to Delhi consumers will also be driven down by the firm stand taken by the DERC on the reduction in AT&C losses.

It didn't require any firm stand to be taken by DERC in the matter. It was in the interest of the DISCOMs themselves to do it, and they did it, with the support of the Sheila Dikshit government, and inspite of Arvind Kejriwal himself trying to sabotage their efforts (check my post of 8th Oct,'12, scrolling above).

It is also hoped that the move by the DERC to have a physical verification of the assets of the distribution companies and the billing audit will also help contain the regulatory assets.

We'll have to see about that. From what's available so far on the CAG report (check my post of 18th Aug, 2015, scrolling above), there doesn't appear to be any comment in it on asset valuation.

However, the AAP government which question the veracity of the regulatory assets has demanded that instead of accumulating funds to wipe out the remaining balance the DERC should further reduce the electricity prices charged to the consumers. But the DERC, which explains the stability in the electricity tariff to the reduction in regulatory assets and carrying costs and the strict curbs on buying and selling of costly power by the distribution companies, seems to prefer a less radical stand.

That's what regulation is all about. Besides, there are government nominees on the DISCOMs boards too, with their holding 49% stake. And with AAP holding the reins, the comapanies' stand should reflect the government's thinking too.

Whatever be the real reason the Delhi power consumers can heave a sigh of relief. The new power sector reforms being rolled out by the Delhi government will hopefully usher in more competition in the distribution sector will perhaps allow the Delhi government to add to the recent gains.

Very true; but, credit is largely to Sheila Dikshit government, and the Central government that has ended the monopoly of NTPC/ NHPC, Coal India, etc. AAP can perhaps be credited with publishing a fairly objective white paper.

But one person who can claim the real credit for this turnaround is the Delhi chief minister Arvind Kejriwal who made the high electricity prices a major plank of his election campaign.

Pyaralal's 'pyaar' for his 'neta' has apparenty clouded his objectivity, is all I would like to add.

One can only hope that other states where power distribution companies continue to make huge losses learn a few lessons from the Delhi experience.

All of the above only go to reinforce the case for immediate privatisation of power distribution, particularly in cities, as was the theme of this blog, even to begin with. And, if a Karnataka chooses to follow suit, the numerable learnings from the Delhi example (some listed here too) can help smoothen the process, and make it happen far faster. What's required is political will; but that'll not happen unless there's push from the people. And, that's what this petition is all about - do endorse, if you agree!

As for AAP, for all of the benefits Delhi has gained from privatisation of power distribution, it would appear, they would still not want to have much to do with professional players in the field of taxi services, bus transport services, water supply, healthcare, school and college education, etc. Perhaps, they would even want to go back to DESU for power distribution, given half a chance. The why's of it are still a bit of a mystery, and also one wonders how far such an approach can take them.

State-owned NTPC Ltd’s threat earlier this month to cut off power supply to two units of Reliance Infrastructure Ltd supplying to large parts of Delhi due to delay in payments point to the financial distress slowly gripping private power distribution companies in the capital, which are now pinning hopes on central and state governments coming to their aid.

Reliance Infrastructure arms BSES Yamuna Power Ltd (BSEL YPL) and BSES Rajdhani Power Ltd (BSES RPL) and Tata Power Delhi Distribution Ltd are together saddled with more than Rs.36,000 crore of power purchase cost yet to be recovered from consumers due to delay in power tariff revision.

The companies now want not just government intervention in a debt rejig, but concerted efforts to reduce their power purchase cost, including replacement of costly long-term power purchase agreements that were signed by their predecessor Delhi Vidyut Board (DVB) before its privatization in 2002 with new ones from efficient and cost-effective power plants.

Companies believe that joining the Ujwal Discom Assurance Yojana (UDAY) approved by the Union cabinet on 5 November 2015, which was originally meant for state-owned power distributors, will help the private sector too to tide over their financial distress and could even lower power tariff by 75 paise per kilo watt hour.

“At the end of the day, the benefit of financial and operational efficiency achieved from UDAY will go to consumers, whether power is supplied by a government entity or a private one. Consumers in Delhi should not be deprived of its benefit,” said Praveer Sinha, chief executive officer (CEO) and managing director of Tata Power Delhi Distribution.

- - - At present, every unit of power supplied adds to distributors’ debt burden because the regulated power tariff charged to the consumer does not reflect the actual cost of power purchase, according to people familiar with the companies’ discussion with the governments.

State electricity regulatory commissions have to strike a delicate balance between avoiding tariff shocks to consumers and preventing unallowed costs (called regulatory assets) building up on the books of power distributors, which reduce their ability to give quality service. An email sent to the Delhi Electricity Regulatory Commission (DERC) on Monday remained unanswered. Cash flow problems affecting distribution companies’ ability to buy power and to invest in infrastructure maintenance leads to supply disruptions.

Delhi power minister Satyendra Jain on Saturday alleged that power cuts in the state are due to poor maintenance, adding that consumers should be compensated for outages of more than two hours. The state has approached DERC in this regard, he said.

Private power distributors fare way better than state-owned ones in operational efficiency. Sinha of Tata Power Delhi Distribution said the company has lowered its AT&C losses to less than 9% of the total units of electricity supplied from about 53% at the start of operations.

For the full text of a highly readable report (emphasis added by me) in LiveMint, click here.

So, now the reasons for the power outages in Delhi become clear. And, what's Satyendra Jain talking about consumers having to be compensated for outages, by the discoms, when he can't bother to clear the huge dues to them? At least now, he would do well to avail the UDAY scheme benefits and ensure a proper deal to the discoms, so that they can upgrade their infrastructure, and in turn offer an even better deal (it's already far better than what's on offer from govt discoms) to the consumers.

It may also be of interest to note that, unlike the government-owned BESCOM (as well as other Karnataka discoms), which can pass on its financial burden to KPCL (the government-owned generation company), paying it on an average in 13.5 months (check here), the courts reversed their own earlier ruling denying the Delhi discoms the "privilege", once the private players came into the picture (check here). So, that option is closed now.

Terming power theft to be a major menace for distribution companies, BSES, one of the capital's discoms, on Monday said a special electricity court here has sentenced an offender to two years' jail and a Rs 1.48 crore fine.

"Convict Ranjit Singh Chaudhary is sentenced to undergo rigorous imprisonment for two years and to pay fine of Rs 1,48,61,194, and in default of payment of fine to undergo simple imprisonment for 6 months," BSES said in a release here.

- - - "Efforts of discom enforcement teams to check the irregularities are thwarted by organised gangs on many occasions. Whenever enforcement teams reach these areas, these gangs 'gherao' (surround) them and don't let them check their premises," it said.

"Though Delhi discoms have managed to reduce AT & C (accumulated technical and commercial) losses from over 55 per cent to under 15 per cent in the last 14 years, there are still areas in Najafgargh, Jaffarpur, Mundka, Nangloi, Daryaganj, Chandini Chowk, Paharganj, Seelampur, Nand Nagari, Yamuna Vihar, and Karawal Nagar, Shaheen Bagh where power theft continues to be a concern," it added.

Earlier this year too, special courts in three separate judgements had sentenced to rigorous imprisonment Delhi residents for power theft and imposed heavy fines.

For the full text of the report in YahooNews, click here.

Not heard of any such pursuit by our BESCOM or any of the other state ESCOMS - can't be that such thefts are not happening here. As compared to gangs in Delhi, here it would perhaps be just a phone call from the MLA's chaela that'll keep the inspector at bay. And, of course, there's the other factor of the farm loads not being metered at all, which conveniently helps mask all losses under that head.

Very plainly government operations are just not geared for proper accountability, and thereby the need to divest them of the job.