The Aam Aadmi Party (AAP) has demanded an immediate tariff cut and criminal action against electricity distribution arms of the Anil Ambani and Tata groups as a leaked draft CAG report has given Delhi's ruling party ammunition to step up its campaign against these firms.
The party said the leaked report vindicated its stand and should immediately be put in public domain. While the party demanded stern action and said the regulator should reject the petitions to raise tariff, Delhi's Power Minister Satyendar Jain was circumspect and said: "We have only gone through media reports, we have to study this in detail."
Speaking to ANI, Arvind Kejriwal said: "Government has received draft CAG report. We are studying it, let the final report come. I am neither confirming nor denying what has come in newspapers, let's wait and see. If what has come in newspapers is true, then this is a big issue. A scam worth Rs 8,000 crore has been exposed."
Distribution companies (discoms) had a different perspective. The Tata firm said it did nothing wrong and had abided by ethical practices, while the Anil Ambani promoted BSES asserted the matter was sub-judice and that the reports were distorted. Analysts said the best way forward was to inject competition in electricity supply and to end the cost-plus tariff system which can tempt a discom to inflate expenditure and understate revenue to get higher tariffs.
The controversy flared up after media reports that the CAG found that discoms had inflated their costs by about Rs 8,000 crore, which Delhi's consumers have to pay; they bought costly power and sold the surplus cheaply to friendly entities and understated revenue to be able to raise tariffs. The report also questioned the conduct of government nominees on boards of discoms and the conduct of the regulator. It highlighted the case of BSES giving a Rs 1,428 crore order to Reliance Energy, a sister concern, according to reports.
AAP said reported irregularities running into thousands of crore in the leaked report were "only the tip of the iceberg". It accused the Congress Party and the Bharatiya Janata Party of allowing malpractices that hurt people in Delhi. "The AAP demands that criminal action should be initiated against those who connived to hike electricity tariffs in Delhi through illegal means," it said.
The Arvind Kejriwal government and the discoms have crossed swords on many occasions. The city's ruling party has consistently accused the companies of indulging in malpractices to raise tariffs. The discoms, on the other hand, say the high cost of power supplied by state firms such as NTPCBSE -0.56 % and NHPC is the main reason why tariffs had to be increased.
The conflict had also pushed Delhi close to a blackout as BSES had defaulted on payments to power suppliers, who in turn threatened to switch off supply. Analysts said the best solution was to move to a new system where competition, not costs, determine tariffs.
"Independent electricity regulatory institutions were created almost a decade ago to regulate utilities, including scrutinizing their cost claims. Still there are frequent disputes around cost claims of utilities, regulators disallowing costs and even not giving tariff increase to the extent of recognized costs. Probably time has come to think of competition and a pricecap regulatory mechanism, in place of the current cost plus regime, at least for City based Distribution Utilities," said Debasish Mishra Senior Director at Deloitte Touche Tohmatsu India Pvt. Ltd.
Kameswara Rao of PricewaterhouseCoopers said Delhi suffered from failure to move away from a cost-plus regulation to a competitive market.
"That would have removed any scope for so-called gold-plating. The same could be achieved by regulators setting a more robust cost benchmarks and undertaking capex reviews as seen in developed power markets. We should not lose sight of the gains achieved by private participation in distribution. Huge recurring losses of most state utilities are ultimately a cost to the power consumer or the tax payer. A stronger regulator with better analytics and open-access competition are necessary to make power distribution efficient and viable," he said.
BSES said criticized the leaked report. "We are shocked at the highly irresponsible, factually incorrect, mischievous and distorted reporting in a section of the media, on a purported CAG audit report on the Delhi Discoms.
These media reports tantamount to blatant contempt of the order of the Hon'ble Delhi High Court, which has put a blanket prohibition on publication of any CAG audit report as the matter is subjudice," a BSES statement said.