The Aam Aadmi Party-led (AAP) Delhi government is planning to approach the Supreme Court against the Delhi High Court order quashing its decision to get the accounts of three private power distribution companies audited by CAG. However, CM Arvind Kejriwal’s commitment to “provide cheap electricity to people” by subjecting the discoms to a CAG audit may hit the wall as legal experts feel that the decision itself is flawed and more of a political stunt.
Says SC lawyer Mahesh Agarwal, who appears for ADAG companies, the Delhi government’s decision was flawed as it sought to reduce regulatory assets and tariff by way of CAG audit which is actually the domain of the Delhi Electricity Regulatory Commission (DERC), which, while fixing power tariffs, obtains the consent of all the stakeholders and takes into account all economic considerations before following due processes in accordance with the law.
Supporting Agarwal, another SC senior lawyer Gopal Jain, who specialises in regulatory matters, feels the government cannot interfere in the tariff-fixation process as it will affect the sanctity of regulatory decision-making process. “The Electricity Act 2003 is a self-contained code and provides for an elaborate and rigorous mechanism for determination of tariffs. A discom has to submit an average revenue requirement to DERC first and it is only after a public hearing and scrutinising/examining of the accounts, including cost of producing electricity, fuel costs and reasonable returns, that DERC fixes the tariff. Once tariffs are decided by DERC, how can CAG revisit the issue. Stringent regulatory checks and controls are already in place under the Act.”
According to him, there is no scope for CAG audit on accounts of discoms post-tariff determination by the statutory authority. “This will result in a complete overlap with the present regulatory regime. The overlap of powers will create chaos. It will be a head-on conflict. CAG can’t go into DERC’s regulatory decisions,” he said, while welcoming the HC’s “well-reasoned” order.
Besides, CAG has conceded it has no jurisdiction over PPPs and wants the government to amend the law so as to bring in PPPs under its purview, Jain said, adding the HC has termed the AAP government’s decision as “populist”.
The Kejriwal government had in 2014 ordered an audit of the three electricity discoms—Tata Power Delhi Distribution Ltd, BSES Yamuna Power and BSES Rajdhani Ltd—amidst allegations they had shown inflated expenses. The companies challenged the Delhi government’s decision on the grounds that they were not government entities, and private companies were beyond the jurisdiction of CAG. They said only 49% of shareholding in them is in the hands of state-owned Delhi Power Corporation Ltd, while 51% is privately held, thus bringing discoms outside the ambit of Section 20 of the CAG Act.
While the Delhi government pointed out that the functions of discoms were public in nature, CAG questioned the claim that discoms were wholly private companies, referring to not only the monetary funding (of more than R2,400 crore of public money) by the state but also the assets of the Delhi Vidyut Board that were transferred to them under Section 15 of the Reforms Act.
Some lawyers practising in electricity laws feel that the AAP can still bank on the Supreme Court’s April 2014 order that empowered CAG to conduct revenue audits of private telecom firms. Opening up the accounts of private telecom companies to a CAG audit, the apex court had said it was imperative to ascertain how the government and the firms were dealing with natural resources, “which belonged to the people of the country”, and that the government received its due share by way of licence fee and spectrum charges, which it is legitimately entitled to, by way of revenue sharing.
The ruling is significant as it will have consequences on a wide range of sectors, particularly natural gas, where licences for exploitation of natural resources have been granted by the government under revenue-sharing clauses.
However, another legal expert termed the HC order as completely wrong. He said that the DERC itself had expressed difficulty in scrutinising the accounts of discoms and had written to the former Sheila Dikshit government expressing dissatisfaction with the accounts submitted by the discoms and had also sought CAG audit.
Suggesting CAG audit also into the discoms accounts, he said DERC audit is only for verification of the vouchers etc and not on prudency check. However, it’s CAG which can compare the market prices and can go into prudency check as has done in case of coal scam and 2G spectrum scam, he said, adding that if telecom companies can be subjected to CAG audit, why can’t be power discoms.
“Supplying electricity is a public utility service. Electricity being an essential commodity should come under CAG purview to check tariffs. Electricity installations are funded by consumers, any increase in the cost of funding an investment is by the consumers and it’s the consumers who brace for higher tariffs,” SC lawyer Vivek Gupta said, while stating that there is no difference between telcos and discoms.
Opposing the view, Agarwal said “power discoms stand on a different footing. While discoms have joint ventures with the states, telecom sector hinges on the revenue-sharing model.”
Jain added that “in telecom, at present, tariff is under forbearance. Also, operators submit their tariff plans before a telecom licence is granted, which is not the case with power discoms.”
If at all the Delhi government wants to bring down the power tariffs, it needs to give grant or subsidy as is done in other states where the government supports discoms through various schemes. “Discoms are doing a state service, and the government should extend a guarantee for the purposes of availing loans in case of build up of regulatory assets,” according to Agarwal.
Some experts feel the Delhi government’s chances of succeeding in the SC are quite slim in view of “well-reasoned HC judgement and the CAG’s own standing order which prohibits intrusion into quasi-judicial processes, as sought by terms of reference of audit”. But it is to be seen what decision the SC will ultimately hold in view of its previous decision in case of the CAG audit of private telecom companies.
indu.bhan@expressindia.com