Originally Published 2013-06-17 00:00:00 Published on Jun 17, 2013
Privatised electricity distribution in Delhi completed ten years last June. Now an important question which we have to ask time and again is, why should the citizens pay for the inefficiency of the distribution companies? This is yet another public service that has become a score point for political parties, giving no relief to the ordinary citizen.
Citizens paying for private sector inefficiency
Since the 2002 privatisation, distribution losses have come down from 55 per cent to 15 per cent. However, one has witnessed significant increases in tariffs in the past few years. After a recent order, Delhiites will have to pay 1.5 per cent more on power tariffs beginning May 2013. This has become a recurring problem, much to the displeasure of the citizens. In the backdrop of this, Aam Aadmi Party led by Arvind Kejriwal has been targeting the Delhi government for hike in power tariffs, problem of faulty meters and several other issues related to private discoms in the city.

In a tariff order drafted by former DERC Chairperson Brijender Singh in April 2010, he observed, "Energy availability from new power plants is going to increase substantially? therefore, the reduction in tariff is appropriate not only for FY 2010-11 but is most likely to continue (or get reduced further) in subsequent years". The draft order was never issued after the Delhi Govt. wrote a letter to the DERC asking them not to issue until the Govt. gives a go ahead for passing the order, citing broad reasons brought to their attention through separate representation to the Government by the three discoms.

The ongoing "scam" by discoms has two facets to it and it would serve us all better if each of them were studied separately.

Unfair trade practices

Unfair trade practices have been rampant in the distribution of electricity. In a report of the DERC on the findings of the commission regarding purchases, it stated that capital goods were purchased by two discoms from their parent company at rates considered exorbitant by the Commission, resulting in transfer of substantial funds by way of profit on sale of capital goods. Moreover, the Aam Aadmi Party has alleged that when former DERC Chairperson checked VAT records of the parent company, he found that goods were originally purchased by the parent company at a price almost 40 % less than what was quoted. Inflated capital and recurring expenditure due to non-transparent and non-competitive capital acquisition are possibly leading to increasing losses, willingly or unwillingly, giving bargaining power to discoms to negotiate favourable tariffs.

In another instance, discoms have procured power at higher cost and sold surplus power at very low cost (in a particular case, almost 50% less) to sister companies under bilateral agreement. Furthermore, DERC in a July 2012 order observed that an abnormally high number of consumers were being billed only fixed charges (i.e. no energy charge was billed as no consumption was recorded in the billing database). The petitioner (discoms) submitted that the billing database is dynamic resulting in changes in number of consumers and sales. They also stated that for zero consumption, it was either that these premises were locked or these were seasonal industries. However, DERC felt that the explanation was not very convincing as the variations were very high and the number of cases of zero bills was significant. Moreover, DERC noticed the inconsistency and changes in the various data submitted by the Petitioner.

Faulty and fast meters

A more pressing concern is regarding installed faulty meters. A lot of public debate and consumer grievance points to the fact that meters are fast, but evidence suggests otherwise. In a recent answer to a Parliamentary Question (Unstarred Question No. 4848, April 25, 2013, Lok Sabha), the Ministry of Power gives information on three meter testing drives conducted in Delhi in 2003, 2005 and 2007. There is no information about any testing drive conducted in the two years. The results show that only a small percentage (0.2 to 4%, depending on area samples) of meters was found to be fast.

In May 2011, the Competition Commission of India (CCI) took suo motu cognizance of the issue of inflated bills resulting from faulty meters. As per the Electricity Consumer Advocate Forum (ECAC), most meters installed in Delhi by the three discoms were found to be running fast. It was of the view that the running of the electronic power meters, faster than the permissible limit was unjustified and imposed additional cost on the consumer and amounted to restrictive trade practice. However, discoms contended that the report of Central Power Research Institute (CPRI) relied upon by CCI is defective as the sample size is too small to be held representative in character for all consumers in Delhi (The report test only 2014 meters, out of a total consumer base of approximately 42 lakh, in a of two and a half years). Further, even the Ministry of Power in its report had accepted that the sample size was defective and too small. The final outcome was in favour of the discoms as the CCI did not find any violations and the conclusions drawn were not accepted.

One area that has not been explored is the technical specification of the installed meters. It is observed, that in cases where installations were not properly done (poor system engineering such as poor earth and neutral connections), spikes in voltage and current cause erratic behavior of the meters. Tests have shown that only low-cost, poor-quality meters having only current sensors lead to increases in reading when the voltage fell. However, when there was a properly designed digital power meter having voltage and current sensors, the error in reading would vary from 0.1 to 0.004 percent. The perception about increase in meter reading was more in areas where inductive loads were higher. A third party research on the engineering aspects of faulty meters could help corroborate on how higher inductive loads (emanating from discoms) results in greater error variation, and thereby inflated bills.


Privatised electricity distribution in Delhi completed ten years last June. A decade is time enough to evaluate this experiment at inducting private investment and management skills into retail electricity distribution in the national capital. It is true that in the ongoing crisis, the political leadership has showed greater awareness of the risk to the sector’s overall health and backed the recent tariff revision in spite of their potential adverse political impact. However, the key question, which we have to ask time and again is, why should the citizens pay for the inefficiency of the distribution companies? This is yet another public service that has become a score point for political parties, giving no relief to the ordinary citizen.

(The writers are research scholars at Observer Research Foundation, Delhi)

Courtesy : The Pioneer, June 15, 2013

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