In your interest.
Online Personal Finance Magazine
No beating about the bush.
The hard fact: those who consume 0-200 units would benefit by Rs170 per month at the most, or 25%. However, well-off household consuming 200-400 units are the real beneficiaries. They will enjoy upto 43% cut in their bill
Aam Aadmi Party (AAP) has delivered on its promise of reducing electricity rates by 50% within three days of assuming power in Delhi and made its implementation effective from 1 January 2014 for three months. Whereas in case of water, the route adopted by AAP was to cross-subsidize part of the population (read detailed analysis of impact of AAP’s water policy on different consumer classes here), in case of electricity, Delhi government has announced a budgetary subsidy to be paid to distribution companies (discoms) from Delhi exchequer as fixing power tariff comes under the purview of Delhi Electricity Regulatory Commission (DERC) and not the Delhi government. How does the subsidy affect the Aam Aadmi? It may surprise your to know that middle-class is a far bigger beneficiary of the power rate cut than the poorer sections.
Firstly, it has disappointed those who believed that reduction in electricity rates would be across-the-board and that it would be come from the discoms that are suspected to be fudging their accounts, even though AAP has also announced a move to begin audit of discom’s account books.
But the bigger question is as to how does this budgetary subsidy impact different consumer classes in Delhi? Is it a subsidy for the really poor or the middle class? Also, what impact it may have on discom’s finances and government exchequer? Is it a prudent decision or it adds more fire to a ticking time-bomb?
The metered slab-wise energy charge for domestic consumers without subsidy, with subsidy applicable before the new order and current subsidy after the new order is given below. We have not considered consumers in other categories as present subsidy is not applicable to them.
The difference between old and new subsidy is that whereas earlier the applicable subsidy in 0-200 units was not applicable if consumption went beyond 200 units, now, consumers within 400 units consumption level would get benefit of subsidy in both slabs. There is a fixed charge levied as per the sanctioned load which is given in Table 1.2 on which no subsidy is applicable
Additionally, there is an 8% surcharge (levied on metered slab-wise energy charge and fixed charge net of subsidy) and 5% Electricity Tax (levied on final amount). There is one more charge -- Power Purchase Adjustment Charge (PPAC) -- which has been discontinued from 31st July 2013.
So, how does it change the billing for consumers at different consumption points? Below is the table (Table 1.3) and graph (Graph 1.1) for comparison. Also, BSES companies claim a cost of Rs7.40 per unit for supplying power in Delhi, but more on this later.
What are the conclusions from these tables and graph?
Middle-class benefits more, not the poor
The question is: what kind of consumers consume up to 400 units of power in a month? Are they poor households or middle-class households, even assuming they are all Aam Admi? For an answer consider the table below (Table 1.4) of power consumption of different household appliances for a broadly representative household that may limit their consumption up to 400 units.
The purpose of this list is to indicate an approximate level of consumption. While care has been taken to source reliable wattage and consumption data, it should not be taken as precise depiction of consumption
Note that the list indicates that a household would be able to afford 1 AC of 1 Ton for cooling, geyser for heating water and yet limit their consumption within the 400-unit limit to gain from new subsidy regime. In our view, such consumption is possible for a middle-class household and is definitely not indicative of a poor household.
Our experience is that for four winter months in a year when air-conditioning is not required, middle-class households (who use more appliances like microwave oven, food processor, lot more lighting, washing machine, vacuum cleaners etc.) generally do not cross the 400-unit consumption threshold. It is a moot point whether such consumption pattern should be eligible for subsidy. Also, as per the ET report, this move is going to benefit ~80% of household with electricity connection. Again, it’s difficult to understand why the capital of India needs power subsidy for 80% of its population.
Due to middle-class activism, Delhi government had started providing subsidy from around April 2012 for 0-200 units slab and later announced it for 200-400 units slab as well. After the announcement of new tariff order by DERC for FY14, whereby rates were increased by 5%, such increase was made good to discoms by Delhi government by increasing quantum of subsidy (from Rs1 to Rs1.20 in Aug 2013) and therefore there was no impact in billed rates to consumers for consumption up to 400 units. Given this background and widespread support to AAP by middle-class, it is not surprising that Kejriwal has taken care of this constituency by bringing in new subsidy regime.
But what are the implications for this giveaway to the better-off middle-class at the macro level? That will be in the second part of the analysis
(Vivek Khaitan is an MBA from IIM Calcutta and is working as a management consultant for past five years in New Delhi)
CBI suspects that certain vested interests within various unions of railways and in alleged conspiracy with private travel operators confirm these VIP tickets against a premium
The Central Bureau of Investigation (CBI) is probing alleged corruption to the tune of crores of rupees in sale of VIP or emergency quota tickets in the Railways. The agency has sought records for the last two years, claiming that even signatures of members of Parliament (MPs) have been forged to confirm the tickets in some cases.
On an average day, as many as 35,000 tickets in various classes of all trains that originate from Delhi or cross the city are reserved under the emergency quota which is also known as VIP or Headquarters quota.
The agency suspects that certain vested interests within various unions of railways and in alleged conspiracy with private travel operators confirm these tickets against a premium, official sources said.
The sources said that the agency had some requests which had forged signatures and in some cases even the letter heads were fake. Initially, the probe may be limited to the national capital but, if required, it may cover other states, they said.
CBI has already registered a preliminary enquiry (PE) last week against unknown persons to carry out a thorough probe for misuse of the railway tickets issued under quota to various railway unions.
The quota is meant for emergencies which includes medical necessity but the agency has alleged that the process was abused by certain vested interests.
It had found some related documents while looking into the functioning of railways as part of its probe into the alleged bribery case involving the nephew of former railway minister Pawan Kumar Bansal.
In May last year, the CBI had also searched the office of an RPF inspector who had allegedly helped the sacked Railway Board member, Mahesh Kumar, besides shifting some movable assets from his Mumbai residence. Many documents which pointed to a scam in railway ticketing were recovered from there.
CBI had, during a discreet probe, claimed to have found that the emergency quota tickets to unions were being handed over to some travel agents who used to charge a huge price for confirming a wait-listed ticket.
A senior CBI official claimed it was a full-fledged racket. The official said the travel agents had been identified and would be called for examination soon besides some of the office bearers of a few railway unions who had allowed confirmation of wait listed tickets.
The judicial commission on Adarsh Housing Scam had indicted several bureaucrats and politicians, including four former CMs of Maharashtra. The state government, which earlier rejected the commission report, has now partially accepted it. Here are excerpts from the report
Maharashtra government that was 'forced' to reconsider the judicial panel report on Adarsh Cooperative Housing Society (Adarsh CHS) scam, on Thursday, partially accepted the report and decided to form a committee to decide upon further action.
Last month, the Maharashtra government rejected the report of the judicial commission of inquiry on the Adarsh CHS scam that indicted several politicians, including four former chief ministers of Maharashtra, for blatant violations of statutory provisions. The report of the two-member commission headed by retired High Court Judge JA Patil came down heavily on those in authority, describing the scam as a bad precedent.
The report of the two-member judicial commission had indicted several politicians including four former chief ministers—Ashok Chavan, late Vilasrao Deshmukh, Sushilkumar Shinde and Shivajirao Nilangekar Patil—for blatant violations of statutory provisions. Several bureaucrats were also indicted in the report.
While accepting the judicial commission report in parts, the Prithviraj Chavan-led Congress government accepted quid pro quo allegations against former chief minister Ashok Chavan. On the other hand, it gave a clean chit to former chief ministers, Sushilkumar Shinde and late Vilasrao Deshmukh, and ministers Sunil Tatkare and Rajesh Tope.
Here are excerpts from the Adarsh Report (remember Rs7 crore of public money has been spent for making this report and politicians from Maharashtra have ‘partially’ accepted it):
The complete report can be downloaded from http://www.satyamevajayate.info/