Delhi distributors risk losing licences in power row

by Reuters
Tuesday, 4 February 2014 15:10 GMT

* Distributors warned to keep supplying power

* Firms having trouble paying for the power they distribute

* Power generators have warned distributors to pay up

* Distributors say regulators have barred needed tariff rises (Adds comments from power distributors)

NEW DELHI, Feb 4 (Reuters) - The government of India's capital, Delhi, has asked the region's power regulator to revoke the licences of two electricity distributors if they fail to supply power, drawing criticism from the companies.

The move reflects an escalating row between the newly elected Aam Aadmi Party, which leads the government in Delhi, and two distributors that have been warned to pay power providers or risk being cut off.

The distributors are BSES Yamuna Power Ltd and BSES Rajdhani Power Ltd, run by billionaire Anil Ambani's Reliance Infrastructure Ltd.

"The proposed cancellation of licences in this situation is arbitrary and illegal," BSES said in a statement.

State-run power producer NTPC Ltd said on Saturday that BSES Yamuna Power, which sells electricity in the central and eastern parts of the city of about 16 million people, must pay its bills or be cut off from Feb. 11.

BSES Yamuna Power has already expressed its inability to pay state-run power generation companies citing lower tariffs and a shortfall in revenues.

The row could result in outages of up to 10 hours a day, exacerbating the problems of Delhi Chief Minister Arvind Kejriwal, who was elected in part on a promise of lowering electricity tariffs for millions of Delhi's voters.

Delhi's power secretary, Puneet Goel, said on Monday in a letter to the power regulator that if the distributors maintained their stance the regulator "may not have an alternative but to suspend their licences immediately".

"Extensive blackouts in the capital city of the country due to financial difficulties of the these two (companies) is not acceptable," Goel wrote.

In the event of the licences being revoked, "suitable officers" would be appointed to administer the distribution companies and keep power switched on, Goel said.

The distributors contend that the regulator has failed to increase power tariffs in line with the rising cost of power, leading to a revenue loss of more than 150 billion rupees ($2.4 billion).

BSES deemed the Delhi government's move to scrap its licences an "extreme measure" and said that it was "extremely surprised" that the matter had not been raised in a board meeting last week.

Reliance Infrastructure runs the distribution companies, with the Delhi government holding a 49-percent stake.

"The Delhi Government's proposed step is a huge setback to power sector reforms, with grave repercussions for the country's future economic growth," BSES said.

Kejriwal, a former anti-corruption activist, in December asked the state auditor to look into the accounts of power distribution companies to see if they were profiteering. The companies have challenged the move in court.

($1 = 62.6925 Indian rupees) (Reporting By Sruthi Gottipati and Devidutta Tripathy; editing by Angus MacSwan and Jason Neely)

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