In an interview to CNBC-TV18, Pramod Deo, former chairperson, CERC, discussed the Delhi government’s accusations against power companies and whether its subsidies could adversely impact the health of the discoms.
Also read: Delhi tariff cut won't hit power cos, discoms: Power secy
Q: There is a lot in terms of politics that has been going on in Delhi, the Aam Aadmi Party (AAP) has alleged that the private distribution companies were overcharging but are not the costs of the distribution companies (discoms) closely scrutinized by the regulator already, can they then still overcharge according to you?
A: Allegations that have been made in the public and in media have been that they have incurred heavy capital expenditure and there could be gold plating in that and in the tariff determination when the capitalization takes place then that gets added to the equity. Since this companies get return on their equity, naturally if you have heavy capitalization done then your equity base will increase and they will earn higher return. Return percentage maybe fixed, somebody may have 16 percent but your base has increased and that is how they could get more money. So this is the allegation and that is why the demand has been that audit should be done by Comptroller and Auditor General (CAG).
Q: What exactly would your assessment of the privatization of the Delhi power distribution be?
A: As a CERC I did not have any role because we dealt only with inter-state matters, inter-state tariffs of generation, discoms and also the power generation and transmission company. We don’t deal with discoms, it is exclusively reserved with the state regulatory commission. But I also happen to be the chairman of the forum of regulator where all the chairpersons of the state regulatory commission used to meet and evolve common approach to our regulations.
In that we have been discussing these issues. As far as the tariff determination process is concerned, it has to be done under regulation and each state regulator frame their regulation. So even the balance sheet, how their accounts are to be read, it is then according to those regulations. If somebody wants to challenge those regulations, regulations can be challenged but regulations are challenged not in the appellate tribunal, they are challenged in High Court (HC) because the violation of the regulation could be put in question. So here is that something which has been suppressed, something which has come out. So this is something which has to be seen.
Q: What exactly would your assessment of the privatization of the Delhi power distribution be?
A: As a CERC I did not have any role because we dealt only with inter-state matters, inter-state tariffs of generation, discoms and also the power generation and transmission company. We don’t deal with discoms, it is exclusively reserved with the state regulatory commission. But I also happen to be the chairman of the forum of regulator where all the chairpersons of the state regulatory commission used to meet and evolve common approach to our regulations. In that we have been discussing these issues. As far as the tariff determination process is concerned, it has to be done under regulation and each state regulator frame their regulation. So even the balance sheet, how their accounts are to be read, it is then according to those regulations. If somebody wants to challenge those regulations, regulations can be challenged but regulations are challenged not in the appellate tribunal, they are challenged in High Court (HC) because the violation of the regulation could be put in question. So here is that something which has been suppressed, something which has come out. So this is something which has to be seen.
Q: Just wanted to focus on the state aspect of it, for example are SERC chairmen independent enough in the first few years after the electricity act was passed, SERCs were not independent they were appointed by the state government and then they behave like state government employees as well, now do you think that they have been empowered enough to behave independently?
A: In fact, they are because of the law because 2003 act has taken care of that. Section 65 very clearly says that if the subsidy is to be given, it must be paid upfront. It is not only the regulator because as I said appellate tribunal on electricity is reviewing this periodically, so they will immediately take cognizance and anybody can go, move the appellate tribunal and point out that this is what has happened and the bills that are being issued are showing the subsidy and the subsidy amount has not been paid to the distribution company. I am sure, the distribution companies if they are owned by state government may not be able to do that but anyone can move the appellate tribunal on that matter.
Q: Do you think the regulatory system that has been reformed over the past few years is resilient enough to protect the DISCOMs from populist policies of the political parties?
A: I will say that the framework of the law has given sufficient safeguard and legally it is an airtight case. It has to be implemented - it is not that only the distribution companies had to go and challenge because they are owned by government if they are unable to do that, somebody else will go and challenge that. That being the case, I don’t think you can have any more safeguards than that.
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