A simplified timeline of electricity privatization in Delhi

INFORMATION

The idea of privatization of electricity occurred in 1999. By 2002, it was complete. It was in July 2002, that Delhi Government privatised distribution portion of Delhi Vidyut Board (DVB).

A logical question is - Why DVB had to be privatised in the first place?

-There were serious cash losses in the system. And instances of electricity theft.

-There was no register of assets or an accurate master list of customers. Similarly, there was poor information about which customers were in arrears.

- DVB had accumulated receivables of about US $400 million. In addition to this, no audited financial statements had been prepared for more than a decade.

- Still, in 2000, a Tri-partite agreement between DVB, its employees and the Delhi government was reached that protects the "employment" and pension rights of the employees.

- Delhi government had to subsidize DVB every year by about Rs. 1,500 crores (US$ 315 million) through “loans” that were never likely to be repaid.

- The total liabilities of the electricity sector (primarily government loans and power purchase dues) in Delhi was a little over Rs 23,100 Crore (over $5 billion). Effectively the servicing of these liabilities had not been met by DVB’s customers but rather by taxpayers.

- Since the inefficiencies could not be eliminated overnight, no private investor would be willing to take over the system unless the Delhi government would agree to provide direct or indirect subsidies for several years.

Before we go further, we need to understand the role of DERC (Delhi Electricity Regulatory Commission)

What is DERC?

- Simply put, DERC determines the tariff for electricity, wholesale bulk, grid or retail. DERC began functioning in December 1999 - three years prior to the privatization. .

- When the Delhi government began considering privatization, it was advised that the commission’s existing tariff policies (which were regulated by DERC) would be a major impediment to successful privatization.

- Delhi Government decided to issue a policy statement that required DERC to adopt certain tariff policies that the government believed were necessary to attract "private investors"

What directives did the Delhi Government issued?

-It defined the process of privatization.

-Proposed a set of opening loss levels for tariff setting purposes but which still needed DERC’s approval.

-Specified that bidding would be on the basis of a multi- year loss reduction trajectory rather than bids for the price of the equity interests.

-Mandated a sharing mechanism for revenues if the new private discoms beat the annual loss values specified in the trajectories accepted by the government.

-Required that DERC adopt the annual loss targets accepted by the government in the privatization agreement when the commission set annual tariffs for the discoms.

-Specified that retail tariffs can change over time but would have to remain uniform across the three private discoms during the 5 years following privatization.

-Required the regulator to set the prices that the discoms pay for power purchases from the Transco as a derived number based on an annual calculation of the estimated shortfall in the discoms’ annual revenue

requirements.

-Committed the government to provide a loan to the Transco to allow it to subsidize the discoms’ bulk supply costs up to a maximum of Rs. 2,600 crores (US $546 million, later increased to US $692 million or Rs. 3,450 crores)

Meanwhile, in the service of corporate's...

-A high level political support was made operationally effective by the fact that there was a small group of Delhi government officials who could respond quickly to the inevitable “crises” that arise in any attempt at privatization.

After DERC was tackled - what next?

- The assets and liabilities of DVB (Delhi Vidyut Board) were transferred to the Delhi government and then to six successor companies—one generating company, one transmission and bulk supply company, three distribution companies and one Holding Company. The three distribution companies were privatized but the three other companies continued to be owned by the Delhi government.

- Six companies - AES, BSES, Cescon, China Light & Power, Reliance Power and Tata Power - were pre-qualified but only two entities-BSES and Tata- submit proposals.

- Share Acquisition Agreements are signed with BSES Ltd. and Tata Power Company. BSES acquires controlling interest in two of the distribution companies, viz. South-West Delhi Electricity Distribution Company Ltd. and Central-East Delhi Electricity Distribution Company Ltd., and the Tata Power Company will take over the management of the third distribution company, viz. North-Northwest Delhi Distribution Company Ltd.

It is not clear why four of the companies decided not to bid. The two foreign businesses may have just been reacting to the general worldwide withdrawal of international players from power sector investments in developing countries. Reliance is now the owner of BSES and consequently may, at the time, have not wished to be bidding against a company it was considering acquiring.

Information about the bidding

The transaction was one where the private operators bid on the level of technical and commercial loss reduction to be achieved over the five years. The government proposed that losses would be calculated annually using a concept called Aggregate Technical and Commercial Losses (AT & C).

Loss reduction targets were set by the Delhi government from an average of over 50% to around 30% after five years.

BSES and Tata stated that they would not be able to meet the government specified targets. Instead, both companies responded with bids that would commit them to achieving cumulative loss reductions of 5 to 10% less than the government’s targets.

The government agrees, and more...

-The Delhi government commits to subsidize the new private discoms for up to Rs 3,450 crores (USD $720 million) for a period lasting no longer than 5 years. No specific amount of money is targeted for each discom. And there are no restrictions as to how 3,450 crores will be spent - it could be used up within two or three years or five years.

-In addition to the power purchase subsidy to the discoms, the Delhi government announced that it would

provide an additional subsidy of Rs. 52 crores to subsidize the tariffs of residential customers who consume

less than 400 kWhs per month. The government made the announcement just before the commission

issued its first post-privatization tariff order.

-The price for power is based on the discom’s “ability to pay” rather than the Transco’s costs of supply.47 In effect, the burden of the subsidy is shifted back to the Transco which has been mandated to supply power to the discoms at a loss.

-In other words, the discoms would first reimburse themselves for their distribution and retail supply expenses. The discoms are explicitly given the first “rights” to the retail revenue.

-The amount of subsidy received by an individual discom will depend, in part, on its internal operating efficiency. A less efficient discom will be eligible to receive a larger subsidy. As a general principle, it does not seem like a good idea to create a subsidy systems that rewards inefficiency with a higher subsidy.

What's wrong with the policy?

-These subsidies were intended to avoid the need for large post-privatization tariff increases. It doesn't achieve that.

- Regardless of when and how the subsidies are delivered, Delhi consumers will ultimately pay for the subsidies either in the form of higher taxes or in reduced government services.

-The disadvantage of the Delhi approach (where several contiguous discoms are being privatized) is that it leads to uncertainty over exact boundary lines, ownership of moveable assets, responsibility for shared services and allocation of shared costs. After privatization, the Delhi discoms have had to spend time trying to sort out who owned what—time that presumably would have been better spent on improving service and reducing inefficiencies.

- In any privatization that involves a subsidy, there is always a risk that the private companies will come back after a year or two and assert that they need a larger subsidy because their costs are higher or their revenues lower than It is also “partial” system in another respect. Two key regulatory elements, the distribution and retail supply license and quality of service standards, were not specified prior to privatization.

Source: The Delhi Electricity Discom Privatizations (2003)

On day of rally to Sheila Dixit's house, Economic Times published this article http://archive.is/rgDY5 as "expert" opinion - which overlooks many facts mentioned above.

The politics of caste and religion

OPINION

India has a complex social structure largely dominated by casteism. History reveals a pattern wherein roots of political parties have been based on caste or supported by voters belonging to a particular caste. Examples of this would be Shiv-Sena, Bahujan Samajwadi Party, Vishawa Hindu Parishad or Maharashtra Navnirman Sena. You may like to go through this list here - and categorize parties which are representative of a particular caste or religion. There are way too many. History also tells us that all these parties were formed to preserve the interest of a particular group, caste or religion or to free them from some kind of "oppression". Aam Aadmi Party is also a result of oppression - there was no party which preserved the interest of hard working, tax paying, law abiding, common man who did not believe in these separatist ideologies, or who was tired of corruption.

But the existence of these caste-based political parties in itself is questionable. If you look at it, the Indian Constitution provides enough provisions for "trouble-makers". Let's say - for instance - if a Hindu is troubling a Muslim, the troubling Hindu will be put behind bars. If a Muslim is troubling a Hindu, the troubling Muslim will be put behind bars. If someone from upper caste is oppressing someone from the lower-caste, the person from the upper-caste will be put behind bars. I only mention this to make a point - the Indian constitution and Indian Penal Code does not take into account any particular caste or religion as a parameter - then what is the reason for a political party to be based on a particular caste or religion? Don't these political parties believe in the power of Indian Constitution and Indian judiciary?  

If we look at 'caste' separate from politics, you may agree that the "norms" within a particular caste by itself are not bad, and objectives can be achieved without the political shell. Take for instance, the objectives achieved by Anna Hazare in his village of Ralegan Siddhi where villagers themselves constructed ponds, reservoirs, and small dams on their own, and planted around 4 lakh trees. Elsewhere, in Rajasthan, a labor union Mazdoor Kisan Shakti Sangathan (MKSS) or Workers and Farmers Power Organisation is known to frequently obtain access to official expenses under the Right to Information Act. This group cross-checks expenses made by the government, and assesses the actual work done on its basis. The group, though less-educated, has ably exposed several frauds within the government. This proves one thing – politics, based on caste system, achieves much less. And even heavy labor workers, who may not have much education, can achieve their goals without giving political tone to their motivations. This leads us to a question - political parties, which are run on the basis of caste, do have an ulterior motive  -they mainly cite protection from 'external threat' as a reason for their existence - when there is none. The common man, who doesn't necessarily believe in this theory of 'external threat' has to pay a heavy price - in terms of utilization of national resources - and the way in which policies are framed to appease a particular caste or religion.

Aam Aadmi Party's motive is to cut these barriers raised by political parties which have not contributed to India in anyway. AAP's ideology is simple - give power back to hard working, tax paying, law abiding citizens of this country irrespective of their religion, caste or creed. If you are one - make sure you vote for AAP.

Poll survey says, 'AAP to win' - news media buries the report without explaination

A news report on this link disappeared after being online for a few hours. Was there something wrong with the source? If yes, why didn't the publication do a story questioning the methodology of the source? Or at least provide a clarification for retracting the news update?

The report cited a survey done by this agency which predicts that majority of votes in the 2014 Delhi Elections will go to AAP. We have the google cache - so feel free to read it here.

This news features in google search results, and people who want to know more about the contents of this report might be unable to do so unless they know the link for the cache.

Though the news publication has removed this news report, this story continues to appear in the search result. Do you know why? It is likely that many people are clicking on the link to read the news story, and more this link is clicked on, google algorithms will recognize this as something that is widely read, and refuse to bury it down.

But there are several questions that this incident raises, but first of all, people must write to the editor of this online news portal demanding an answer. Additionally, it must be cross-checked whether http://news.oneindia.in/ is registered with Registrar of Newspapers of India or any other similar body that recognizes a news publication on internet. You can file an RTI application, or write to the Grievance Redressal. Such incidents must not be over-looked anymore. Newspapers/Magazines/Online publications  are bound to provide us with objective, unbiased information, and also answerable regarding the contents of a news story they publish or retract.

Another question is - does RNI only recognize "Newspapers and Magazines" or also "Online News Publications" - there is no information available online with respect to this. Every newspaper (print publication) comes with a registration number which can be cross-checked on the website of Registrar of Newspapers of India - what is the process for online news publications?

A suggestion to online news publications, newspapers and magazines - if you cannot provide objective news/information/analysis then start a blog.

Kejriwal's fetish for Topi - really?

I would urge you to read this article first, and then read the rest of this post. What you just read, may be classified as an example under “second level agenda setting”.

What second level agenda setting does is - it tells you “how to think about the object”. You can read more details about second level agenda setting here.

Don’t you also feel that a newspaper like Business Standard had a good opportunity to do a business story? Investigating whether there is indeed misappropriation or collusion between business houses and politicians? And perhaps an investigation about how much percent of rise have these private companies made, and on what basis? But you see a rather needless take on Arvind Kejriwal - one that is far from the niche of the newspaper. And by the way, the word “fetish”, is usually used with a sexual connotation - I am unable to make sense of why it was used here.

Anyway.

Do you remember the issue of Vir Sanghvi? His case is an apt example of second level agenda setting and framing.

Let's take an excerpt found in Open Magazine to better understand this.

VIR: What kind of story do you want? Because this will go as Counterpoint, so it will be like most-most read, but it can’t seem too slanted, yet it is an ideal opportunity to get all the points across.

RADIA: But basically, the point is what has happened as far as the High Court is concerned is a very painful thing for the country because what is done is against national interest.

VIR: Okay.

RADIA: I think that’s the underlying message.

VIR: Okay. That message we will do. That allocation of resources which are scarce national resources of a poor country cannot be done in this arbitrary fashion to benefit a few rich people.

RADIA: That’s right.

Did you notice what Vir Sanghvi did? He offered to do something very subtle - “That allocation of resources which are scarce national resources of a poor country cannot be done in this arbitrary fashion to benefit a few rich people.” Simply put, he “framed” the issue in a manner that it becomes an issue of the "country". In short, through his columns, he wanted the common man to think about this issue in a certain way.

There’s another interesting thing I found.

It was reported that Ambani’s lost Rs 20,000 crores in 'market value'. The timing about this story is questionable, and I would urge people not to believe it unless hard core evidence is also provided with the story - is this also confirmed by SEBI? Please check all the news reports for the quotes used, and write to the editor to put online the facts on which this story is based. I am anticipating that such a story will be used by “experts” and columnists by tommo or in coming weeks, to suggest that Ambani’s are going into loses, and Kejriwal’s protest harms the Indian economy.

What the media won't tell you, but tell you about Kejriwal's fast

I scrolled through a few web pages for news relating to Arvind Kejriwal's fast (Civil Disobedience), and found that there were glaring contradictions between what I read on news portals, and what was distributed on social media (mainly Twitter).

Simply put, news websites played down Kejriwal's fast as something which has failed to gather response, or is a "flop show". On the other side, Twitter provided with documentary evidence of what was happening on ground. Whom would you trust?

These are images of on ground activity of the movement.

 Volunteers (unpaid, self-motivated) went door to door to gather consensus. 

More evidence/cases of inflated electricity bills were found. In this particular case, a women received a bill of approx. Rs 93,000 for a small room she lives in. If such a thing was to be discovered by a journalist on his own, he or she would have done a news story. But since AAP is first to raise the issue, perhaps, there is no more news value to it.  

And some more... 

This is another related event in Lucknow where medical students, protesting in support if AAP were arrested.

These are people coming out in support of Kejriwal's fast, and denouncing unjust rise in electricity bills.

Seated on left is Mr. V Kalyanam, who has worked in the capacity of personal secretary to Mahatama Gandhi. He came to meet Arvind Kejriwal.

And like any normal human being would - Arvind Kejriwal also spent some personal time with his family.

  

But this is the image which flashes on TV.  

In the above picture, I can see Headlines Today reaching a conclusion of sorts "Civil Disobedience Flops" - does it support this conclusion with a research? And what are the parameters under which this movement can be qualified as a successful one? 

I also came across some news stories, which can be considered as downright dishonest practice of journalism.

For instance, the above headline is stated. Is it a fact? Is it supported by a research? How many people did this reporter interview in order to reach to this conclusion? In the hurry of being creative, and using pun-intended headlines, the journalist (or maybe the sub-editor) seems to have forgotten some basic principles. Such a statement cannot be made unless the reporter has surveyed/interviewed a representative population of Delhi.

The above news story (also archived here for sake of posterity) crosses all limits of journalistic sensibilities. It offers to tell you "How" Kejriwal's fast became a flop show but doesn't answer the "How" part (and remember the fast is only in its 3rd day at the time of this report). For those who don't know components of a news story - here it is - very briefly, it consist of 5Ws and 1H - (5W's - What, Where, Who, When, Why and How). Read the news story for yourself, and see if it answers the "How".


Another assertion stated as fact in the above news headline. After reading the headline Delhi: Kejriwal's civil disobedience movement fails to attract public, one would be curious or expect that the report will now answer "why" and "how" the movement failed to attract public. Some natural questions which arise are - Is it that the people do not want to participate because they do not like Kejriwal's initiative? Or they do not agree to the method of protest? Or his party? If yes, an objective reporter will support his claims by quoting at least a handful of  random people (remember, it still would be inappropriate to use a headline as one above). But guess what - this report does not include a single quote of any common man, whether opposing or supporting- and still makes a rather tall claim in the headline.

So were there publications which followed basic journalistic sensibilities before publishing stories around Kejriwal's fast? 

Very few. Citing an example below.

A headline like the one above is safe to use when one is not sure what is going to happen next. This headline is questioning the potential of the movement to mobilize people, and it is fair to do so. But in journalism in India, questions and question marks are perhaps the most abused (and mind you, its importance - grammatical or contextual is rarely understood). An issue can be framed even through a question mark.

Do you think its happening in the headline below?

The ‘Kejriwal is Naxal’ propaganda

Some politicians labelled Kejriwal as Naxal - this is classified as 'name-calling' in study of propaganda. Motive is to denigrate someone.

Let’s have a look at some news stories first:

(1) Naxalite in Anna Hazare’s team

(2) Anna must cut ties with Naxals

The above link (2) is particularly interesting because it is aimed at creating differences - suggesting that Anna is good, but Kejriwal is bad (read: a Naxal)

(3) Subramanian Swamy calls Kejriwal’s aide Naxalite

(4) Kejriwal offered Anna Hazare around Rs. Two Crores

There are some stories - like the one above (4) which do not come with byline (name of the journalist). If the byline is missing, if people quoted in the news story are only mentioned as “sources” and the story includes things like “inputs from agencies” - you must ask yourself, and in fact, feel free to write to the editor of newspapers or online publications- “Which agencies exactly?” “Why was the name of the source not revealed?”.

Well, there would be many other examples. However, one thing worth observing is- What really happens after a politician sets-off the “name-calling” propaganda?

Here's a chain of events which follow:

(1) Journalists more often than not go berserk - and the next time they get to meet Kejriwal at a press conference, they ask his opinion -“What do you have to say about Swamy’s allegation about you being a Naxal?” The controversy around the subject, intentionally or unintentionally, remains or is kept alive. A benefit of this tactic is that the name/label (ex: Naxal) seeps into the public memory - harped over and over again.

(2) Asking opinion is fine - but next to it, have you ever thought why journalists don't consider investigating the truth themselves? After all, it is their job to tell the people whether there is substance to the allegation made. And if there is, a journalist must do an investigative story. But that defeats the purpose of  "name-calling" - because “name-calling” propaganda sets off an entirely different chain of events - one which is not constructive to the public and political debate. It is like building castles in air. If I were to use an analogy to explain what follows - it would be of two pick-pocketers working in an organised manner - where one pick-pocketer keeps his target busy by engaging him in needless conversation, and the other pulls the main trick of fishing out the wallet. This trick can be easily pulled by politicians who have stake or influence in media. The purpose of the “name-calling” propaganda is to divert the issue and disturb the consensus by leveling false allegations. One way to recognize this is asking yourself - is the person who is leveling the allegations supporting it with any evidence? Providing any sensible leads at the least?

(3) But more often than not, the journalist is busy toy-toying like a tennis ball from one part of the court to the other, and feels he is doing a great job by letting the people know "opinions". Albeit, they are not even "opinions" - they are "allegations" - which are neither cross-checked by the journalist, nor dropped if it lacks substance. Some journalists realize this, and are idealistic, but many don’t - the path of investigative journalism, of finding the truth by their own - is rarely followed.