Organised power theft

As government conceals truth, bulk of the consumers will continue paying costs of someone's consumption and organised power thefts.

While a large part of the 21 million electricity consumers across Karnataka heaved a sigh of relief as the Karnataka Electricity Regulatory Commission (KERC) approved only a nominal hike of 15-20 paisa against the proposal of Electric Supply Companies (ESCOMs) for a steep hike of 80 paisa per unit across all sections of consumers, the basis on which the whole tariff is structured remains mysterious to most.  

Though what is obvious in the new tariff seems comfortable for the consumers, the basis and substance of the tariff structure continue to rest on a bunch of inexactitudes and fabricated figures, obviously for the convenience of ESCOMs and to extend undue benefits to many vested interests.

The Bangalore Political Action Committee (Bpac) opposed the proposed tariff hike by submitting a technical paper and again presenting their arguments in the public hearing conducted by the KERC. The new tariff structure is in no way different from the previous ones in shielding the ESCOMs in continuing with their inefficiencies and misrepresentation of facts.

The tale begins with the government’s lip service to the large section of poor farmers in the state. By declaring that 39 per cent of state’s power is being consumed by farmers, the government is making them accountable for the entire leakages and power thefts rampant across the state. Nobody would accept this figure when the agriculture sectors of other states like Maharashtra, Gujarat and Tamil Nadu consume only 18, 19 and 18 per cent, respectively, of their state’s total consumption.

If the consumption by irrigation pump (IP) sets are metered and measured, the bitter truth that the energy consumption of agricultural sector of Karnataka is not different from other states would come out. While all ESCOMs are unanimous in claiming that farmers are against installing meters for their IP sets, the truth is that the unmetered connections enable all ESCOMs in dumping their unaccounted consumption, part of losses and the leakages (including known and unknown power thefts) on the poor farmers’ and thus draw government subsidies for the entire unaccounted power.

The ESCOMs do ask why other consumers are concerned about unmetered free consumption since the government bears that entire burden. This is the second inexactitude in the story. Going through the newly approved tariff of BESCOM for instance, anyone can understand this. While the average cost of electricity is Rs 5.6 per unit, the charge-discharge transaction (CDT) for IP sets is only Rs 2.38 that is being reimbursed by the government.

So, how is the remaining Rs 3.22 being recovered? It’s from other consumers through cross subsidisation. That means a large part of the cost of unmetered free power (of 39 per cent), which is worth Rs 10,500 crore, is being borne by other consumers through cross subsidies, though the government claims the burden entirely on its account. Isn’t it a kind of regularisation of power thefts by the government?
If we go with the account of ESCOMs, one-third of the so called 1.9 million IP sets installed across the state are yet to be traced. There are no records available of the operating efficiency or the hours of operation, of those which are physically located.

ESCOMs just adopt crude ways to fix the yardstick of average consumption by IP sets. While the Electricity Act, 2003, recommends that cross subsidies shall be progressively reduced and eliminated, the National Tariff Policy endorses that the cross subsidy variation should be brought down gradually and to the extent of not more than 20 per cent of the cost by FY2011. It also recommends direct cash subsidies to the under privileged.

Direct cash subsidies
Yet, the government is shying away from extending direct cash subsidies to the poor farmers, the same way gas subsidy is being implemented now. If the meters are installed and direct cash subsidy to the needy population is implemented, the ESCOMs may have to answer for about 20 per cent unaccounted leakages in the system. This one action by the government alone could turn Karnataka in to a power surplus state.

This year, a large part of Rs 7498 crore government subsidy will be spent on covering leakages, theft and misuse. Adding the cross subsidies of about Rs 3200 crore within the tariff structure, we arrive at a total subsidy Rs 10,698 crore which is 38 per cent of the annual revenue demand of Rs 28,400 crore for all ESCOMs an extraordinarily high figure!

Another interesting twist in the tale is the drastic increase in Cross Subsidy Surcharges (CSS) for direct access power purchases. Industrial consumers at 11/33 Kv and at 66Kv and above, paying CSS of seven paisa and 42 paisa per unit, now have to pay 63 paisa and 98 paisa per unit. As against this, their commercial counterparts who were paying CSS of 138 and 173 paisa per unit last year, now end up paying 160 and 195 paisa per unit respectively. This will make the direct power purchase almost an unviable option for consumers and thereby deny indirectly their rights to get out of the tangles of inefficient ESCOMs by entering into direct power purchase agreements.

If we go on tracing the real stories behind the ever-increasing short term power purchase at very high price, absence of transparent public procurement bidding process by treating private and public power producers at par (as recommended by NTP), unacceptable level of transmission and distribution (T&D) losses, poor standards of performance despite amplifying operational costs, non-compliances to KERC’s own guidelines etc., many more skeletons will fall out of the stores, unveiling the horrifying style of functioning by ESCOMs.

As long as the government policies support ESCOMs in concealing the truth from the public, bulk of the consumers will continue paying the costs of someone’s consumption, system leakages and organised power thefts.

(Pai is Vice President, Bpac and Parame-shwar is Head, Regulatory Affairs, Bpac)