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Privatization of Power Sector Proves Successful for Dehli

The privatization of the power sector in Delhi has been very successful, resulting in savings of around Rs 30,000 crore by the city Government in the last ten years.The report by SBI Cap Securities on the power sector came amid an outcry over a hike in power tariffs in the city by nearly 50% in the last one year.

The report, which examined the health of power sector in a number of States, complimented the Delhi Government for initiating reform in the power sector in 2002 and said the “Delhi model” proved “effective” and has been a boon for all stakeholders.

“The privatization of power distribution has resulted in significant amount of savings for the Delhi Government.According to various media sources and our interactions with the industry, the Government of Delhi has been able to save Rs 300 billion over the past 10 years,” the report said.The huge saving has helped the Delhi Government make funds available for various schemes to improve the standard of living for the residents of the city, it said.

The report by the subsidiary of State Bank of India said that the “gradual replication” of the Delhi model would go a long way in sustaining the distribution segment of the power sector in other States:

“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 privatization would be decisive in sustaining the power distribution sector,” it said.

The Delhi Government had initiated reform in the power sector, notwithstanding criticism by various sections, under which power distribution was given to three distribution companies, BSES Yamuna Power Ltd, BSES Rajdhani Power Ltd and North Delhi Power Ltd. The Delhi Government has 49 per cent stake in each of the three discoms.

Comparing the privatization model in Delhi with that of Odisha, the report said the Delhi model proved successful due to the constructive support provided by the city Government coupled with an efficient management of the licensed entities.

On financial position of distribution companies, the report said the higher cost of power purchase led to the deterioration in their financials as they slipped into losses in 2008. “Of late, all the three private discoms have not been allowed high power purchase cost, which leads to a rise in regulatory assets.”

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