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Business News/ Politics / News/  Delhi shows way for other states as electricity subsidies light up electoral fortunes

Delhi shows way for other states as electricity subsidies light up electoral fortunes

AAP’s campaign was based on standout initiatives in health, education. Its crushing win is expected to spur the party to push its development agenda
  • AAP’s manifesto promises to extend the free lifeline electricity of 200 units in the next term as well
  • A file photo of Delhi chief minister Arvind Kejriwal announcing free electricity up to 200 units for the capital. (HT)Premium
    A file photo of Delhi chief minister Arvind Kejriwal announcing free electricity up to 200 units for the capital. (HT)

    NEW DELHI:Providing free power up to 200 units every month for households paid handsome dividends for the incumbent Aam Aadmi Party (AAP) in the Delhi elections.

    A 50% subsidy on monthly power consumption of up to 400 units announced in 2015 and capping electricity tariff for the fifth consecutive year also helped the Arvind Kejriwal-led party’s success in retaining power.

    Interestingly, the Trinamool Congress (TMC)-ruled West Bengal state government has taken a leaf out of the AAP playbook. Both these parties have political strategist Prashant Kishor rewriting their rules of engagement. West Bengal’s finance minister Amit Mitra on Monday announced free electricity to consumers with quarterly consumption of up to 75 units in the 2020-21 state budget.

    Experts believe Delhi’s power sector reforms and its subsequent performance has helped AAP execute its poll promises. As compared to India’s average aggregate technical and commercial loss of 21.4%, which is among the highest in the world, Delhi, where electricity distribution companies (discoms) were privatized in July 2002, registered the lowest loss of 9.7% in the country.

    By comparison, West Bengal’s average aggregate technical and commercial loss is at 26.74%. Also, the gap between the cost of electricity bought (average cost of supply) and supplied (average revenue realised) for Delhi is 19 paise per unit. In West Bengal, the gap is 2 paise per unit.

    Electricity is supplied to Delhi consumers by Anil Ambani-controlled BSES Rajdhani Power Ltd, BSES Yamuna Power Ltd, Tata Power Delhi Distribution Ltd, Military Engineering Services (for Delhi Cantonment) and the New Delhi Municipal Council.

    “Power reforms and privatization in Delhi in early 2000s ensured losses were brought down from above 50% to below 10% in 15 years. It still has issues on contested regulatory assets which are more than twice the annual revenues of the utilities," said Sambitosh Mohapatra, partner, power and utilities at PwC India.

    A regulatory asset is created when the regulator accepts certain expenditures but does not factor them in while determining tariff. These expenditures are to be adjusted in future tariff and, in the interim, are accounted for as regulatory assets. India’s regulatory assets have ballooned to 1.5 trillion.

    The free power decision of last year has benefited about 3.2 million residents in the national capital and is expected to cost the exchequer 1,800-2,000 crore annually. According to Delhi chief minister Arvind Kejriwal, 200 units of electricity cost 1,400 in Mumbai, 910 in Gurugram and 1,310 in Noida.

    According to AAP’s manifesto, free lifeline electricity of 200 units which the Delhi government has provided in its current term, will be extended in the next term as well.

    “Subsidies are manageable but issues on need, affordability, owner versus tenant and customer versus meter remain. Also there is a fear that other states with different base conditions may jump onto the subsidy bandwagon for quick political gains," said Mohapatra.

    Free power to farmers and other such subsidies have burdened power discoms and generators. Even as soaring subsidy costs have left state governments with little money to spend on welfare programmes, they are reluctant to end free power supply, fearing a political backlash.

    The free power promise by the states comes in the backdrop of the Centre coming across instances of them failing to pay struggling distribution utilities for free power supplied to farms and unmetered consumers, though states claimed to have made substantive payments, Mint reported on Monday. At least 10 states are losing about a third of the power supplied to their consumers in distribution losses.

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    Published: 12 Feb 2020, 12:00 AM IST
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