|Wages of neglect|
|Tuesday, 20 September 2011 00:00|
All those railing against PPP projects have a lot of ammunition nowadays. Delhi’s electricity tariffs have just gone up 22% and another hike is expected in another six months. Many power producers, and that includes biggies that include the Reliance Group and the Tatas, are now trying to renegotiate power projects that they won in bids they made with their eyes wide open; and, as FE reported on Monday, the private sector concessionaire Delhi International Airport Limited (DIAL), which runs the Delhi airport, wants a 500% hike in airport charges—this includes, for instance, the money that an airline has to pay for landing in Delhi. While the airport regulator is still deciding on the matter, experts have told FE this could lead to a 20-40% hike in fares as airlines will pass on the burden to passengers.
Whether you agree or not with DIAL’s costs (it says it has invested R12,718 crore so far) or whether you think the returns the company wants are excessive or even whether it should have been allowed to retain the advance rentals it receives without sharing them with the government, the issue on hand is different. And that is, the current fees that are being charged to airlines were fees that were set way back in 2001. Given the large costs that have been incurred in the interim period, continuing with that fee structure has led to a large accumulation of past dues that now has to be made good. In the case of Delhi’s power sector, similarly, the accumulated dues (‘regulatory assets’ in regulator jargon) added to around the annual revenues of all the power distribution companies! In the
petroleum sector, we’ve seen, the refusal to allow timely hikes has meant that despite the recent hikes, the under-recoveries are still over R1 lakh crore. Call it the wages of neglect.