AAP’S power play: 50% received subsidy in FY20

Subsidy grant rises with increasing demand, net population availing free power in Delhi

Around 50 per cent of the population of Delhi have had subsidised electricity bills in the current financial year, which is a record of sorts.

Half the subsidised population received zero electricity bills during the past five months. This is the highest number receiving subsidy in the last five years of the Aam Aadmi Party’s (AAP’S) governance in Delhi.

In 2014-15, the number of people availing of subsidy was close to 2.5 million. In the current year, the number has doubled.

Since it came to power, AAP has consistently pushed for reduction in electricity rates every year.

There were three consecutive reductions in energy charges by 50 per cent every year during 2015-18.

In July this year, the Delhi Electricity Regulatory Commission (DERC) approved a new model of subsidy over and above the existing scheme. Under it, the fixed charge was cut by more than half. The fixed charge for up to 2 kilowatts (kw) was decreased to ~20 from ~125. For the more than 2 kw and less than 5 kw bracket, it was reduced to ~50 from ~140. The fixed charge for the more than 5 kw and less than 15 kw was reduced to ~100 from ~175. The DERC also gave 100 per cent subsidy to the consumption bracket of 0-200 units.

An electricity bill comes with two components — a fixed charge, which remains the same every month, and energy charge, which is calculated in accordance with consumption.

As a result of this, the number of people coming under the subsidy net also doubled in the current financial year alone. The highest number of subsidised consumers was in December, touching 4.8 million. Delhi’s population is 19 million, according to the Census of 2011.

For low-consuming households, these decisions came as a boon. So much so that during off-peak demand months (October to December), an estimated 2 million people got zero power bills. However, this did not ensure that low-income households received the benefit.

Experts have said this is an inefficient method of offering subsidy. Before the fixed charge reduction, the subsidy was in percentage but it has now worsened with such a low threshold for availing of subsidy, said Rahul Tongia, Fellow, Brookings India. “There are two problems with this model. First, the threshold for subsidy is very generous. So in some off-peak months it covers close to 90 per cent of consumers. This includes not just lower- and middle-class consumers but the rich. The second problem is that it gives zero incentive to a consumer to save energy.”

AAP in its manifesto has declared it will continue with the “pro-people” policies of 200 units of free electricity if it comes to power after Saturday’s poll but the economics of it would play up with rising demand. The Delhi power demand peaked above 7,000 Mw in July and December. This was higher than that of Bihar, Jharkhand and Kerala. Unlike these states, Delhi has primarily urban consumers.

In the 2019-20 Budget, the Delhi government set aside ~1,720 crore for 50 per cent subsidy in power bills. It passed a supplementary demand for grants, including ~535 crore to cover the additional subsidy announced in July. Industry executives estimate the cost of subsidy to be around ~2,250 crore, which is likely to increase as consumption goes up every year.