Delhi Chief Minister Sheila Dikshit may have managed to douse the anger of the Capital's citizens at the recent power tariff hike by agreeing to roll it back, but a larger problem of the credibility of private sector players remains.
While Delhi citizens have focused on the poor service and billing problems of the Anil Ambani-controlled BSES, it appears that even the power regulator, the Delhi Electricity Regulatory Commission (DERC), takes BSES' plans with a pinch of salt.
Since the privatisation of the erstwhile Delhi Vidyut Board (DVB) was done in such a way that power tariffs were to be hiked to take into account the investments made by the two private firms (BSES and the Tata-controlled NDPL), it is important to keep tabs on the investments, and to see whether these are justified.
The past two years show that, while the DERC has almost always approved the investment plans of NDPL, it has sharply pared BSES plans. In 2003-04, NDPL proposed an investment of Rs 339 crore (Rs 3.39 billion), of which Rs 287 crore (Rs 2.87 billion) were approved by the DERC.
In 2004-05, DERC approved more than the planned investment of Rs 303 crore (Rs 3.03 billion), and for the current year, the full plan has been approved.
In the case of BSES, only about a fourth of the investment proposed was approved in 2003-04 -- Rs 112 crore (Rs 1.12 billion) of the proposed Rs 408 crore (Rs 4.08 billion) for BRPL, which supplies power to southwest Delhi. The figure was Rs 85 crore (Rs 850 million), of the proposed Rs 325 crore (Rs 3.25 billion), for BYPL which supplies power to central and east Delhi.
In 2004-05, the two BSES firms fared slightly better and got around 60 per cent of their planned investments approved by DERC. For the current year, however, the figure is down to a third -- just Rs 477 crore (Rs 4.77 billion) have been approved out of BRPL's proposed Rs 1,400 crore (Rs 14 billion), and Rs 426 crore (Rs 4.26 billion) out of BYPL's Rs 1,165 crore (Rs 11.65 billion) investment plan.
Roughly, 12 per cent of the total investment made has to be paid back to the company each year through increased tariffs (3.75 per cent for depreciation and another 8-9 per cent to pay for interest).
To take the example of BRPL, which will sell around 545 crore (Rs 5.45 billion) units of power this year, had the company been granted the full Rs 1,400 crore of investment instead of the Rs 477 crore (Rs 4.77 billion) approved, around Rs 110 crore (Rs 1.10 billion) extra for the year would have had to be paid to the company, or around 20 paise per unit of power.Meanwhile, since November, the DERC does not have a head. Earlier the DERC had just one member, instead of three.