Delhi Chief Minister Arvind Kejriwal’s decision to offer a subsidy to reduce power tariffs has raised concern. The 50 per cent subsidy on the first 400 units of electricity consumed will cost the Delhi government `200 crore in the January-to-March period. This will be in addition to `550 crore subsidy the previous government announced in June last year.
Kejriwal is hoping an audit he ordered of power distribution companies (discoms) will catch “gold plating” and he may not have to pay the subsidy. Gold plating refers to companies
inflating costs to raise tariffs. However, Arvinder Singh Lovely, the Congress’s Delhi unit president, warns that the subsidy could rise to `1,350 crore next fiscal, if the audit doesn’t reveal any wrongdoing.
Kejriwal’s move is forcing other states to announce similar steps. On January 6, the two discoms in Haryana, where assembly polls are due this year, decided to keep tariffs unchanged for the next fiscal year. In Maharashtra, Congress MPs Priya Dutt and Sanjay Nirupam have sought electricity subsidies for the state. Assembly polls in Maharashtra are likely to be held along with general elections due by May. Similar demands have been raised in Andhra Pradesh and Punjab.
This comes at a time when many discoms are in precarious health. In September 2012, the
finance ministry announced a bailout package for some discoms. Banks also are wary of lending to the sector.
Not surprisingly, power sector experts have criticised the move. Ashok Khurana, Secretary General of the Association of Power Producers, an industry group, says the problem with subsidies is that state governments do not make provisions for them in their respective budgets and do not fix a mechanism to pay subsidies. “This disturbs the cash flow of distribution companies. After all, they have to buy electricity, and trading happens in cash. They have to take on debt and in the current market scenario the cost of money is very high,” he says. Aashish Mehra, Managing Partner of the Asia-Pacific chapter of US-based consultancy Strategic Decisions Group, agrees. “If this becomes
a trend, we surely will not be heading towards resolving our energy crisis,” he says. “There has to be a fair value for electricity consumed.”