In power punch, AAP orders discom audit
Jan 01 2014 , Mumbai
Cagey power companies say issue sub-judice
“We have ordered an audit of the private power distribution companies. CAG has said it will do the audit,” chief minister Arvind Kejriwal told reporters after a meeting of his cabinet.
Kejriwal said the lieutenant-governor’s order would go to CAG on Thursday. “From tomorrow the audit will begin,” he said.
While the order by lieutenant-governor Najeeb Jung will technically allow the government and CAG to audit the accounts, the matter is sub-judice and is being heard by the Delhi high court. The next hearing is on January 22.
Honouring its poll promise, the AAP government on Tuesday halved the power tariff by offering a subsidy till March 31. The subsidy is for consumption up to 400 units and will cost the government Rs 200 crore in the three months.
Shares of Tata Power fell by 1.09 per cent to close at Rs 90.35 on Wednesday, while the Reliance Power stock advanced 1.43 per cent to Rs 74.25 amid lacklustre trading.
When contacted by Financial Chronicle, the Tata company’s spokesperson Ajey Maharaj said, “We are waiting for the order to reach us by tomorrow. We will wait for the order to decide on the process.”
Asked if they would oppose the audit, the spokesperson said, “If the law of the land demands an audit, we will definitely comply with the directive. We will comply with all the statutory and administrative laws and regulations.”
The Reliance Infrastructure spokesperson declined to comment, saying the matter was sub-judice.
Power analysts and consultants slammed the action, calling the Delhi government decision retrograde. When all the states are reducing subsidies, Delhi has gone back to subsidies — not good for the state’s economy, they said.
“At best the regulator should introduce periodical checks to see if the claimed capex spends are properly done. That will ensure that the money is spent properly in the core business. This should not mean an audit. More than 70-80 per cent of the cost is already audited,” said Kameswara Rao, PwC executive director for energy.
TPDDL supplies electricity to 1.3 million consumers in North and North- West Delhi. The other two companies, BRPL and BYPL, supply power to the rest of the city, except areas under New Delhi Municipal Corporation.
Bhargav B, senior power analyst at Ambit Capital, said the audit would make no major discovery. “It is more of a rhetoric and election gimmick. This will not pay in the long term. Tata Power’s accounts are already audited at every stage; hence there won’t be much problem there. But it is difficult to say the same about Reliance Infra companies for they are not listed and we don’t have access to their financials,” he said.
The point was seconded by independent analyst A K Prabhakar, who said the Delhi decision was taking the economy back through subsidies when there was no way to recoup the money. “Investors will be de-motivated at a time when the sentiments are already at their lowest in the sector.”
Ripples of the Delhi government decision were felt at the national level on Wednesday, with Sanjay Nirupam, the All-India Congress Committee general secretary, urging the Maharashtra government to reduce the price of power in Mumbai for consumption up to 500 units.
In a letter to his party chief minister Prithvi Raj Chauhan, Nirupam said the problems in Mumbai were similar to those in Delhi and the subsidy allocations in the past had benefited only the distribution companies and not the consumer.
While the debate on the power tariff cut is on, the Delhi Electricity Regulatory Commission (DERC) is likely to begin this month the tariff revision process for 2014-15.