Delhi power company struggles to pay dues as blackouts loom

Fri Aug 16, 2013 12:46am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Matthias Williams

NEW DELHI (Reuters) - Gopal Saxena, the chief executive of a power distribution company run by Reliance Infrastructure Ltd RLIN.NS, which is controlled by Indian billionaire Anil Ambani, faces a tough choice.

He could break a mandate to supply around-the-clock electricity to 1.8 million customers in south and west Delhi, or he could wait for two power utilities to make good on threats to cut off supplies to his company unless they are paid $590 million owed in late payments.

Either way, the capital of Asia's third-largest economy is facing the prospect of blackouts.

His dilemma underscores the rot in India's power sector after years of rising debts, fuel supply shortages, corruption, red tape and tariffs kept artificially low by populist politics. In the sweltering summer heat last year, the country suffered a mass blackout, affecting an area where 670 million people live.

Such problems have hobbled Prime Minister Manmohan Singh's efforts to fix India's chronic power shortages, which are a drain on economic growth - now at its lowest rate in a decade - and sap the competitiveness of its businesses.

"Unfortunately we have not had a cost-reflective tariff from the regulatory commission, which has imposed severe burdens on us," Saxena told Reuters in an interview in his Delhi office. "We are faced with Hobson's choice: I have to supply power 24/7. I don't have the money to pay. Now if I do not pay, somebody is going to cut off the power, or somebody has to pay the cost."

Reliance took over BSES Rajdhani Power Ltd (BRPL) in 2002 in partnership with the Delhi state government. It was a rare foray by a private company into the power distribution business, which is mostly controlled by India's 28 states.

BRPL officials say they have helped improve electricity supplies in Delhi since the distribution business was privatized there, but at a big cost to their company.   Continued...

 
An employee works on electric pylons at a power station in Greater Noida on the outskirts of New Delhi, in this June 8, 2012 file photo. REUTERS/Parivartan Sharma/Files