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Issue #1626      February 12, 2014

India: Power supply spat

India’s Supreme Court ordered state power producer NTPC to continue supplying power to distribution companies in the capital Delhi to avert blackouts amid a dispute over wholesale payments. It is the latest development in an escalating row between Delhi’s newly elected ruler the Common Man Party and power distributors that have been warned to pay their providers or risk being cut off.

The distribution companies claim that by keeping tariffs low, politicians have strained their finances and forced them to resort to crippling power cuts.

“The consumer would be the sufferer,” said Justice SS Nijjar, one of two judges who made the order.

“Think about them.”

BSES Yamuna Power, an arm of billionaire Anil Ambani’s Reliance Infrastructure, sells electricity in the central and eastern parts of New Delhi and runs two distribution companies there in a joint venture with the state government. It had faced a threat from NTPC that its supply would be cut off from February 11 if it did not pay its bills.

The firm claims that unrealistically low tariffs and a revenue shortfall have meant that it could not pay its bills. But Reliance Infrastructure reported a 26 percent jump in its third quarter net profit over the same period in the last financial year.

The Ambani family is the richest family in India and one of the richest in the world. The Delhi government had asked the region’s electricity regulator to revoke distributors’ licences if they halted supply, drawing howls of indignation from the firms, which claim that the regulator has failed to ensure that power tariffs keep pace with rising costs.

India’s power sector has been marred by years of rising debts, fuel supply shortages and corruption.

Morning Star

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