Truths about the privatisation of power distribution

The Delhi Electricity Regulatory Commission is supposed to be an independent authority that sets the prices consumers have to pay for electric power in the national capital.  However, on 4th May, 2010, the Delhi Government issued a directive to the Commission not to issue the tariff order for 2010-11.  As a result, the privately owned distribution companies of the Tatas and Reliance are overcharging consumers to the extent of Rs.300 crore per month.  This has been stated in the most recent communication from the Chairman of DERC to the Chief Secretary of Delhi Government, who is also Principal Secretary for power.

In his letter dated 1st July, 2010, the Chairman of DERC asked the Delhi Government to withdraw its orders blocking the tariff order, citing how it is adversely affecting consumers.  In the same letter, he has denied the claims of the distribution companies that they have made huge financial losses.  He has pointed out several reasons why power tariff for consumers in Delhi must not be hiked. One major reason is the availability of more and cheaper power from new generation plants-- Jhajar, Bawana, Dadri, Maithon, Mejia, etc.

He states in his letter that “the tariff orders for financial year 2010-11 were finalised in which the three private distribution companies have a surplus of Rs.3,577 crore after meeting all expenses and after allowing the return on capital admissible to them under the multi-year tariff regulations”.  This means that the Government is blocking the Regulatory Commission from issuing tariff orders that would deprive the Tatas and Reliance of Rs. 3577 crore of additional profits.

According to the Chairman of DERC, “The issues raised by the distribution companies in their representations before the Government have been examined and it was found that the factual position was entirely different from the position as mentioned in their representations”.  In other words, he has accused the Tatas and Reliance companies of hiding their real financial position and presenting a false picture to the Commission.

It is to be remembered that Delhi was the second Indian state, after Orissa, where the distribution of electric power has been completely privatized. The champions of this ‘reform’ claimed that it would enormously benefit the consumers as well as the government budget, in addition to generating profits for the private companies. They claimed that in place of the inefficient and corrupt State Electricity Board, there would emerge efficient distribution systems run by private capitalist companies, and that there would be an ‘independent’ regulatory authority that would listen to all interested parties, including the consumers, before issuing tariff orders every year.

The recent developments have exposed several important facts that need to be noted by the working class and people, not only those resident in Delhi but all over the country, as the Delhi power sector reform is being held up as the model for all states to follow:

Fact Number 1: Far from being independent and empowered to decide in the best interests of all concerned, the Regulatory Commission is completely dependent on the State Government, and can function only at the pleasure of the state government.

Fact Number 2: Handing over power distribution in the capital to two of the biggest monopoly capitalists of India, the Tatas and Reliance, has led to complete capture of the Power department in the state government by these powerful private interests; as a result, the Delhi Government is acting as the agency of the Tatas and Reliance.

Fact Number 3: While rise in cost of production is always used by monopoly capitalist companies to demand higher prices for their products, a fall in cost of production is not seen as cause for lowering prices, but rather as a source of additional profits.  Hence consumers do not benefit by handing over power distribution to greedy capitalist monopolies.


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supply    working class    rights    energy    power    DERC    Jul 16-31 2010    Political-Economy    Economy    


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