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#India – #AAP promises on Power, Water and Health and its pitfalls

AAP says attacking corruption, raising efficiency, judicious capital allocation, and not subsidies, lie behind its promises. ET outlines party’s plans and what could go wrong on three such promises.

By Soma Banerjee, ET Bureau | 26 Dec, 2013,

AAP says attacking corruption, raising efficiency, judicious capital allocation, and not subsidies, lie behind its promises.


The Proposal

Reduce electricity bills by 50%. Take a graded approach, starting with lowest 20% consumption bucket

THE RATIONALE

According to Vinod Mittal, an member, the party’s thinking on power is shaped by a draft tariff order passed by the Delhi Electricity Regulatory Commission (DERC). The origins of this draft order lie in a petition filed by BSES Rajdhani Power, an ADAG company that is one of the three power distribution firms (discoms) in Delhi. 

The draft order had estimated a revenue surplus of Rs 3,577 crore in 2010-11 for the three discoms—of the other two, one is owned by the Tatas and the second by the Anil Ambani Group again—and recommended a 23% cut in tariffs. The government of the day, led by Sheila Dikshit, rejected this order, and tariffs were not cut. AAP believes the road to slashing tariffs runs through this order by DERC, then headed by Brajendra Singh 
Mittal, a former official in the Prime Minister’s Office, was one of the petitioners in the Delhi High Court against the Congress government’s decision to reject this draft order. He alleges that BSES Rajdhani has business practices that end up inflating tariffs for the average consumer. 
The first practice, alleged in the AAP manifesto, is that of cost padding in capital expenditure. One of the considerations while setting power tariffs is to ensure a 16% return on investment to a discom. “In 2010, one of the discoms bought equipment worth Rs 800 crore for an inflated sum of Rs 1,200 crore from a partner concern,” the manifesto says. 
the second, says Mittal, is the sale of surplus power. A discom enters into long-term contracts to buy power, but there are times when the power it is receiving from the generation company is more than the demand. It then has the freedom to sell the surplus.

Mittal alleges BSES Rajdhani sold surplus power to a sister concern, Reliance Trading, at rates as low as 7-70 paise per unit, when the Delhi consumers were paying between 4.5 and 5.5 per unit. This matter is currently pending in the Supreme Court. “Surplus power—which can range from 500 mw to 2,000 mw in a day, depending on the weather—was being sold at abysmally low rates, thus showing lower profits,” alleges Mittal. A spokesperson for BSES declined to comment.
A senior power sector official, speaking on the condition of anonymity, says this is an overtly simplistic way of looking at surplus power and fallacious to extrapolate it to tariffs. “One has to trade surplus power, if any, based on the market conditions at any point of time,” he says. If there is no demand in neighbouring states, we are compelled to sell power at no cost.”

THE IMPLEMENTATION

In its manifesto, AAP says it will order an audit of discoms and complete it within three months. Besides, discoms that will refuse audit will lose their licence. It also plans to have meters checked by independent agencies.
During the hearings of DERC draft order, BSES Rajdhani had rejected stakeholder demand for an audit by the government auditor, saying it was governed by the Companies Act and did not receive government grants. But rules exist where it can be audited in some circumstances.

Under Section 20(1) of the CAG DPC Act 1971, the government can ask the Comptroller & Auditor General (CAG) to do a special audit on private entities if there is a larger public interest and it aids administration. This provision was invoked to audit K-G gas basin of Reliance Industries and other companies like Cairn India. The ordering of special audit or enquiry by the government is also provided under Section 128 of the Electricity Act 2002.

“I agree when they talk of auditing and reviewing performance of discoms,” says Suresh Prabhu, the Union minister for power in the NDA government, who presided over the most radical reforms the sector has seen. “Privatisation alone cannot solve the problem. There is a need to audit technically how efficiency is brought in.”
THE HURDLES

Even though there are provisions, initiating an audit will be a challenge. As will completing it in what will, in all probability, be a short-lived tenure in governance. The matter could also end up in courts. Further, any changes in tariff structure, like moving to progressive rates, will require amending the Delhi Electricity Reform Act, which is a legislative move.

The Proposal

Provide 700 litres of water a day to every household. Those that consume up to 700 litres don’t have to pay anything; those who use more will have to pay for their entire use

 

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