Maharashtra has no plan to order CAG audit of Tata Power, R Infra...

 

Mumbai electricity consumers will have to wait for an audit by the Comptroller & Auditor General (CAG) for their distributors namely Tata Power and Reliance Infrastructure as the Congress led government in the state has not taken any formal decision in this regard.

The state government has so far not indicated its plan to adopt Aam Aadmi Party led government's model of conducting CAG audit for Mumbai power companies.

Reliance Infrastructure has a consumer base of over 2.8 million while Tata Power with .42 million consumers. When contacted Tata Power and Reliance Infrastructure declined to comment.

A state government official, who did not want to be identified, told "Currently, Tata Power and Reliance Infrastructure carry out their annual audits by deploying leading audit firms. There is no proposal as of now before the government to order CAG audit of these two companies for their Mumbai operations.''

However, the official admitted that CAG audit of these companies can be possible under section 20 of the CAG Act, 1971 which regulates the audit of accounts of authorities or bodies that are otherwise not subject to audit by the CAG.

Section 20 reads "'The Comptroller and Auditor-General may propose to the President or the Governor of a State or the Administrator of a Union territory having a Legislative Assembly, as the case may be, that he may authorised to undertake the audit of accounts of any body or authority, the audit of the account of which has not been entrusted to him by law, if he is of opinion that such audit is necessary because a substantial amount has been invested in."

Central Electricity Regulatory Commission's (CERC)  former chairman Pramod Deo said CAG audit of Tata Power and Reliance Infrastructure can be done. He however, added that the state government will have to take a call in this regard.

Ashok Pendse, consumer representative at the Maharashtra Electricity Regulatory Commission shared Deo's views saying that CAG audit of Tata Power Reliance Infrastructure will be a reality. ''However, at the end of the day what will come out of CAG audit should not be like what atually appears out of magician's hat,'' he noted.

D Radhakrishna, power analyst said CAG audit should be carried out of the generating companies as in the power supply the contribution of Discoms is only limited to 20% but remaining 80% cost attributed to the generation and transmission.

''Thus CAG audit for Mumbai power companies can be done as per Sec 20 of CAG Act 1971. The state government can order such audit,'' he added.

Source: Business Standard

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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.

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