Power of profit

Published : Jul 31, 2009 00:00 IST

in New Delhi

DELHI has never been inviting in May and June. This summer, the capital saw its worst power crisis, and frayed tempers pushed Sheila Dikshits government on the back foot. Power cuts lasting 12 to 15 hours a day became routine, especially in the worst 20 days of June when the temperature shot beyond 44{+0} Celsius. Since then, every aspect of power generation and distribution has been under the scanner as the government found it hard to explain a crisis of such magnitude after the much-publicised privatisation of power distribution in 2002.

The government faced political turmoil with Bharatiya Janata Party (BJP) legislators boycotting Assembly discussions and otherwise disrupting the House session. Eight legislators were suspended from the Assembly for a day on June 29 for disrupting the proceedings after their demand for a discussion on the power and water crises in Delhi was disallowed. They had requested the Speaker to do away with the question hour for this purpose.

As the crisis unfolded, there were questions on the role of the private power distribution companies, or discoms, that are responsible for arranging power and meeting the capitals ever-increasing requirements. When power reforms began in 2002, the Delhi Vidyut Board (DVB) was unbundled into three privately owned distribution companies a power transmission company, a power generation company and a holding company that held most of the DVBs pre-privatisation liabilities. Following the unbundling of the DVB in July 2002, the business of power distribution was transferred to North Delhi Power Limited (NDPL), owned by the Tata group; BSES Yamuna Power Limited (BYPL); and BSES Rajdhani Power Limited (BRPL), owned by the Anil Dhirubhai Ambani group. All this was part of the Delhi governments effort to increase the efficiency of power distribution. These entities function as joint ventures with the Delhi government, but they hold 51 per cent of the shares.

While BYPL and BRPL distribute electricity to 22.6 lakh customers in two-thirds of Delhi, NDPL does that for 10 lakh people in North and North-West Delhi. The areas covered by BYPL and BRPL had the longest and most frequent power cuts, which made these two companies face the maximum public anger. Incidents of violence were reported across the capital against the discoms customer care centres. Customers complained that the companies were not responsive enough to complaints about power failures, that electricity meters were faulty, and that there were long delays in rectifying the problem. NDPL, however, seemed to perform better, mainly because of its strong human resources and the infrastructural upgradation it undertook over the past few years.

Chief Minister Sheila Dikshit intervened to warn BSES to meet the crisis. Followed by high-level meetings in the Delhi government, she asked BSES to draw up an action plan that would enable the power demand to be met and would also address the problems that would arise in power distribution with the onset of the monsoon transformer malfunctions, for instance, or moisture accumulation in main cables.

Since the discoms also have the responsibility to buy power to meet Delhis demands, Dikshit said, It is their responsibility to procure power. It does not matter whether it is Rs.5 per unit or Rs.50. She was responding to the CEO of BSES, Arun Kanchan, who had told Frontline that there was not much power available in many power stations across North India because of high temperatures and increased demand all over. The only way possible is to buy power through power exchange that can come at a very high rate, he said.

However, according to a Power Ministry report, all the three discoms have, in fact, sold 5.4 million units of energy through power exchange for Rs.5.35 crore between June 21 and June 29, the worst phase of the power crisis in Delhi. Power Ministry officials, who did not want to be quoted, said that despite the shortage of power in the capital, the three discoms had a history of selling power for profit and being stingy when it came to purchasing power for the city. In the monthly report of the Central Electricity Regulatory Commissions (CERC) short-term transactions of electricity, compiled by the Market Monitoring Cell, Delhi ranked among the top five power sellers of the country both in the open market and through bilateral agreements for the first three months of 2009. But it ranked among the bottom five in purchasing power.

The power demand has touched 4,261 MW in the city. This is the highest in many years, but even now the total shortage is not more than 400 MW in the capital, according to government figures. Going by the figures, the power shortage is around 10 per cent of the maximum demand, and the power cuts should not have lasted more than 2.4 hours a day.

But the problem goes beyond just power shortage, unlike what BSES officials would have one believe. Sources in the Power Ministry blamed poor maintenance by BSES as much as power shortage.

The DVB, under the Delhi government, functioned with the sole purpose of providing service, but the private discoms are here for profit. If a company makes profits, it is also expected to upgrade its service and infrastructure, but BSES has not spent much on its units and it does not have adequate human resource to address peoples grievances. Since the power sector is one that directly affects people, accruing profits should be secondary. This situation is only one of the negative outcomes of the privatisation of such an important sector, one official said. A.K. Sah, former Chairman of the NTPC has a similar view: The discoms are being very commercial by not buying expensive power when consumers are suffering.

It can be safely said that the crisis has come because of mismanagement by the discoms. Delhi generates about 1,250 MW on its own and gets an allocation of around 2,000 MW from the central pool. So, the discoms are supposed to arrange only around 1,000 MW or less every day. Less, because the power demand in Delhi varies every day, and sometimes the difference between the maximum and minimum demand during the day can go up to 1,000 MW, said Rishi Raj, Public Relations Officer of Delhi Transco Limited. Delhi Transco Limited, under the Delhi government, is responsible for wheeling power to the discoms and is known for having the lowest transmission loss in India. The discoms, therefore, seem to be the only entities responsible for the situation.

The Reliance-backed BSES has been operating for seven years, but its chairman, Lalit Jalan, admitted that the old distribution network had not been replaced. Around 50 per cent of the network is old and needs replacement. Old transformers are prone to breakdown, he said.

Upgrading the whole system would have made power supply unviable for consumers in the long run, he added. However, replacing the transformers was part of the mandate for the private discoms when they took over from the DVB.

Instead of spending money from their own pockets, the utilities are now demanding investment from the Centre. On their behalf, the Delhi government has also sought funds from the Union Ministrys Rs.50,000-crore national scheme for power infrastructure development.

The Accelerated Power Development and Reforms Programme (APDRP) would give Delhi around Rs.300-400 crore as part of the funding, according to a newspaper report. The money will only be used for better services. Why should Delhi consumers not benefit from Central funds just because their power distribution is privatised? asked Arun Kanchan of BSES. The three discoms, however, are rich with a surplus of Rs.938 crore, and BSES claims to have spent Rs.3,500 crore on infrastructure upgradation.

The Delhi government still stands by its claim that decentralisation makes the power sector more efficient. However, the Public Accounts Committee (PAC) of the Delhi Legislative Assembly during the previous Sheila Dikshit government criticised the whole process of privatisation in its report in 2006. The committee, headed by a Congress member, S.C. Vats, accused the core committee of the State government of bending all rules and colluding with the business houses to accrue monetary benefits to the latter.

The PAC reportedly recommended an inquiry by the Central Bureau of Investigation (CBI) to ascertain the circumstances that led the members of the committee to go against the interest of the public exchequer by favouring the conditional bidders. The BJP, citing a CAG report, alleged that there was a Rs.12,000-crore scam in the power sector, and this became a campaign issue in the last Assembly election.

BSES has also been notorious for quoting an exaggerated Aggregate Revenue Requirement (ARR) to be approved by the Delhi Electricity Regulatory Commission (DERC). For instance, in 2004-05, BRPL claimed Rs.800 crore as capital investments. Of this, the DERC cleared only Rs.525 crore. For the same year, BYPL claimed Rs.700 crore, but the DERC cleared only Rs.416 crore.

The Tata-owned NDPL, in contrast, claimed Rs.328 crore all of which was cleared. The DERC also complained, in the same year, that both BRPL and BYPL had spent just 40 per cent of the capital expenditure approved by it towards improving the power distribution network in the capital. The scorecard of NDPL is better: it spent almost 75 per cent of the capex approved by the DERC. Earlier this year, the DERC also sent notice to the discoms to replace faulty meters following numerous complaints of abnormally inflated electricity bills.

The only aspect in which the private discoms have proved more efficient than the DVB is the reduction of power losses and thefts. The losses, which were at 52.3 per cent in 2002-03, are now down to less than 20 per cent.

Yet, the controversial privatisation of Delhis power distribution network, now in its eighth year, has proved to be an enduring headache for Sheila Dikshit as performance has not matched expectations and frequent power cuts have made the administration vulnerable to attacks from the Opposition and from disgruntled workers of the ruling party. More and more people now question the very basis of the privatisation decision, which has so far only meant power cuts and rising tariffs for the people and higher subsidies for the government.

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