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Wednesday, 24 October 2012 01:03
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Delhi needs more tariff hikes, DERC being populist

Given the R14,000+ crore turnover of Delhi’s three electricity distribution companies, the R200 crore reduction that the Delhi Electricity Regulatory Commission’s (DERC) latest tariff revision imposes on them appears just loose change. And if, in the process of hiking rates on the relatively well off, the DERC has managed to lower tariffs a bit for the not so well off, so much the better—indeed, since the bulk of users consume under 200 units of electricity a month, this even takes the edge off various agitations including the ill-conceived one by Arvind Kejriwal where he encouraged consumers to not pay their electricity bills and burn them instead. The way DERC managed to do this was to go back to the pre-June (when it hiked tariffs) slab structure of 0-200 units where consumers continue to pay R3.7 per unit, 201-400 units where they will now pay Rs 5.5 instead of the R4.8 decided in June (in June, the two slabs were collapsed into one), and above 400 units where the rate will be raised from R6.4 in June to R6.5 now.

There are two problems with what DERC has done. One, since it changed tariffs just three months ago, the revision suggests it either never did its homework then or that it is open to political pressure. Neither is desirable since the 201-400 unit households can now go on strike. Even more important, however, is the context in which the hike has been made and then partially watered down. Even after the hike, the three firms have a revenue gap of just under R7,000 crore. If the DERC allowed them to charge this, that would have meant a 50% across-the-board hike. Instead, DERC told the firms to be satisfied with a lower hike, take an IOU from Delhi’s customers and perhaps a bank loan to service this—so, the three firms have taken on bank loans to buy power which they sell at below-cost to consumers with the hope that next year, or the year after, DERC will allow them to recover their IOUs. How does a supposedly apolitical regulator then cut tariffs when it knows full well it needs to keep hiking them? If the Delhi government wanted to protect the 0-200 unit users, it could have made a payment on their behalf. Sadly, it’s not just Delhi’s electricity regulator that thinks it’s a part of the political establishment with a duty to keep tariff hikes to a minimum.

 
 

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