CAG audit of Discoms may be inevitable, tariff cut in doubt...

 

A federal scrutiny of the books of three private power distribution companies appears almost inevitable. But going by the available numbers, the sharp reduction in tariffs promised by both the BJP and AAP would be impossible without raising government subsidy.

A petition questioning whether the Comptroller and Auditor General has the mandate to examine books of private companies, especially when there is no revenue-sharing arrangement with the government, is pending in the Delhi High Court.

But it will be impossible for the new government not to take the fight to the Supreme Court if the HC verdict goes in favour of the discoms. Not doing so would be projected as favouring private companies at the cost of consumers.

Outgoing chief minister Sheila Dikshit had been opposed to a CAG audit and maintained -- rightly so, as the numbers show -- that tariffs in Delhi were lower than neighbouring states and other major cities.

Both AAP and BJP have been demanding CAG audit of discoms that have claimed a cumulative revenue gap of some Rs 20,000 crore owing to tariff revisions not keeping pace with rising costs, including for buying power.

But BJP raised the bar with its promise to cut tariff by 30% if voted to power. AAP went a step further and promised a 50% cut. It is a moot point whether such sharp reduction is possible or economically feasible. But in the backdrop of such tall talk, not pushing hard enough for a CAG audit would be seen as crony-capitalism.

But what would a CAG audit achieve when the Delhi government, with 49% equity in the discoms, has access to the balance sheet and financial details of discoms and can verify any gold-plating or false claim of revenue loss.

After all, discoms source nearly all of their power from public sector generation units at tariffs examined and approved by the central regulator in accordance with the provisions of the Electricity Act. The books are examined by the lenders headed by SBI -- a government bank.

What a CAG audit can achieve, then, is put to rest allegations of overpricing or other revenue leakage. But if the discoms come out unscathed, there would be no other way for the government to either raise tariff sharply or bail them out.

Source