AAP's empty promise: Halving power tariff

It has been more than a month since Arvind Kejriwal took over as chief minister of Delhi, but there seems to be no significant progress forward in delivering one of the main promises his Aam Admi Party made to the residents of the national capital-slashing the electricity tariff by half.

It is evident that such a sharp cut is only possible if the state government chooses to subsidise power in the city-capital-or if it manages to get electricity distinctly cheaper from the generating companies.

Forcing the distribution companies to cut tariff to that extent, when the task of reaching electricity to the people has been given to the private sector, is certainly not going to help. Let us not forget, private enterprise has to make profits to survive-and there is nothing shameful about it either.

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.