‘Delhi power privatisation model a boon for all stakeholders’

Delhi’s power privatisation model has been more successful than Odisha and has been a boon to all the stakeholders, claims a report on the power sector by SBI Cap Securities.

The findings of the report are shot in the arm for the Delhi Government that hails the unbundling of the power sector as a major achievement. The report claims the distribution reforms implemented by the Delhi Government are “quite effective, unlike seen in states like Odisha. Post transition period [2002-2007], we feel the distribution reform implemented in Delhi has been a boon to all the stakeholders. Steady replication of the Delhi model in the distribution privatisation would be decisive in sustaining the power distribution sector,” the report reads.

The uniform tariff model for all discoms, during the transition period 2002-2007 has helped discoms to concentrate on reduction of commercial losses through better collection efficiency and reduction in technical losses through reasonable toning up of discom infrastructure; this resulted in substantial financial benefits which were passed on to the consumers, leading to decelerated pace of tariff hikes and also lower financial support from the state government, the report mentions.

Commenting on the finances of the discoms, the report says: “The higher cost of power purchase led to the deterioration in their [discoms] financials as they slipped into losses in 2008. Of late, all the three private discoms have not been allowed high power purchase cost, which lead to a rise in regulatory assets.”

Praising the discoms for their performance, the report says the quality of supply of electricity in Delhi has improved post reforms. “Deficit situation in Delhi improved in terms of both peak and energy deficit. Peak deficit has reduced from 9.2 per cent in 2002 to 0.1 percent in 2012. Base deficit has also reduced from 1.9 per cent in 2002 to 0.3 percent in 2012,” it says.

The unbundling of the sector has helped make significant savings for the Government, the report claims. “The Delhi Government has been able to save Rs. 300 billion over the past 10 years. The State Government was saving approximately Rs. 50 billion per year (17 per cent of the State budget) through this privatisation process,” the report claims.