Power play: Delhi, get ready to pay more

The Delhi Electricity Regularity Commission (DERC) will soon have to allow electricity distribution companies to increase power prices in Delhi. The distress call on Thursday by Reliance Infra highlighting the difficult money situation in the electricity distribution business is considered a way to get attention.

DERC has maintained silence for unknown reasons. The Delhi electricity distribution was a fancy privatisation project. With transmission and distribution losses at near 60%, the process taught Delhi residents to pay for the power they use. The current level of losses is 19%, said Reliance Infra.

The privatisation of the distribution was considered a success. If companies like these bleed and eventually have to be bailed out, the taxpayer ends up footing an unnecessary bill. A Mumbai-based sector consultant believes the Delhi government will not let this happen.

“If the distribution companies fail, it would set a bad precedent for investors looking at similar projects across the country,” the consultant said.

The best way out is to announce a phased hike in tariff. The average cost of power generation has gone up 200 percent over the past five years and regulatory authorities have resisted revising any prices. Politicians often use power supply as an election issue. But there are no elections in Delhi soon. The existing government under Sheila Dixit has a strong mandate to take some tough decisions.

Like we had an improvement in tax compliance over the past few years, consumers need to understand that artificial pricing cannot be sustained for ever. It is ultimately the same money that goes from one pocket to pay for the other.