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| Electrifying situation | | State governments can't violate the Electricity Act |
| Business Standard / New Delhi Aug 02, 2010, 00:58 IST |
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With the Supreme Court considering a petition filed by the Central Electricity Regulatory Commission (CERC) on whether the Tamil Nadu government has the right to prevent electricity suppliers within the state from selling power outside the state under Section 11 of the Electricity Act, it is obvious the situation is quite serious. Last year, states like Karnataka, Andhra Pradesh and Tamil Nadu used this provision to prevent sales outside the state. Orissa, which allows such sales, insists that all private generators sell only to the state-owned Gridco — Gridco then sells this to other states at a much higher price, pockets the difference and this is used to subsidise power sales within the state. What is happening in Delhi is different in specifics — it hurts consumers while the others hurt power companies — but the broad tendency is the same, of state governments consciously violating the letter or spirit of the Electricity Act. In the case of Delhi, the three electricity distribution companies (discoms) enlisted the support of Delhi Chief Minister Sheila Dikshit who ordered the Delhi Electricity Regulatory Commission (DERC) to not issue an order which would lower tariffs — even though raw material prices, including those of electricity purchases, have risen, the DERC’s logic is that with thefts reducing, the discoms have more money with them (if theft levels fall from 45 per cent to 20 per cent, as is roughly the case in the last eight years, assuming no rise in raw material costs, tariff levels should come down by 44 per cent).
The DERC got the Solicitor General of India’s opinion which said Ms Dikshit’s order was invalid; the DERC has also questioned the claims of the discoms that they are cash-strapped, by producing reports of a credit rating agency that show they are in reasonably good financial shape. Bank loans could not have been given to them at below PLR if their finances were so precarious, it has argued. In one communication to the Delhi government, the DERC has said that while the discoms have said they had a shortfall of Rs 604 crore in 2008-09, they actually had a surplus of Rs 25 crore — the Delhi government’s order to not issue new tariffs for 2010-11, the DERC says, will give them an additional Rs 300 crore per month on top of the Rs 3,577 crore surplus they would have had under even the new tariffs. Differences among members of the DERC blur the issues, but the question of whether the discoms are right or the DERC is not really material. The point is that there is a well laid-out appellate procedure for tackling such disputes — in case discoms don’t agree with the regulator, they are free to approach the Appellate Tribunal of Electricity and, finally, the Supreme Court. The Delhi government, like so many state governments, is undermining the regulator by interfering with this procedure. The Supreme Court’s verdict in the Tamil Nadu case will undoubtedly shape the credibility of the regulatory process.
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