As Arvind Kejriwal looks set to bite the bullet and form the Government in Delhi, among the first and foremost challenges he has on hand will be to fulfil his election promise of reducing power tariff by 50 per cent. The Aam Aadmi Party (AAP) has been contending that power distribution companies (discoms) in the Capital have been making huge profits, which explains the high power rates. They had already made their plan public to go for audit of discoms when they come to power in Delhi.
However, experts in the power sector said to accomplish AAP’s promise, the only way out is to enhance subsidy. They said the party would need to affect an almost seven to eight-fold increase in the existing subsidy. From the present Rs 400-Rs 500 crore, the AAP Government will have to arrange funds worth Rs 3,200 crore annually to increase the subsidy and slash power tariffs by half. Notably, there is a shortfall of annual revenue collection of Rs 2,000-Rs 2,500 crore in the current financial year. A senior AAP member, however, said they will realise the amount of Rs 4,000 crore outstanding on part of the discoms to Genco and Transco.
Officials say with discoms already defaulting on payments and unable to pay generation companies, the only way out would be increasing government subsidy. Officials say that if AAP comes to power and slash power tariff by 50 per cent to consumers, the Government will have to give subsidy to the tune of Rs 3,200 crore annually.
There are 33 lakh domestic consumers in Delhi while total number of consumers is 44 lakh that includes industrial and commercial users. The per capita consumption of electricity in Delhi is more than 1,651.26 units as against the national average of 778.71 units. The Delhi Electricity Regulatory Commission (DERC) has also accepted that tariffs in Delhi are below par and have announced a series of hikes over the last few years to meet costs. Experts say in this scenario, promises by political parties for a tariff reduction could only come at the cost of the taxpayer if Government subsidies are increased.
A senior AAP leader said they will ensure not burden is put on the exchequer. “It is noteworthy that the discoms owe approximately Rs 2,800 crore to Genco and another Rs 1,200 crore to Transco. They will ensure that the outstanding of discoms towards Government is adjusted in the power tariff bill of consumers,” officials said.
“Reduction in tariffs is only determined by DERC and the Government or political parties have no role in this. The only way to reduce tariff is by giving more subsidies. Discoms have to be financially sustainable and there are no clear cut way to reduce tariffs and can only come down by the subsidy mechanism. Even DERC knows that unless generation costs go down, power tariff cannot reduce and it is the Commission’s responsibility to make the power sector sustainable. Unless there is some subsidy proposed by the Government, with the current financial situation of discoms, a tariff reduction is not possible. Companies are already not able to meet costs,” discom officials said.