SC asks DERC to raise depreciation rate
SC asks the Delhi Electricity Regulatory Commission to raise the depreciation rate to 6.69% from the current rate of 3.75, reports Satya Prakash.india Updated: Feb 16, 2007 04:55 IST
In a verdict likely to jack up power tariff in the Capital, the Supreme Court on Thursday asked the Delhi Electricity Regulatory Commission (DERC) to raise the depreciation rate to 6.69 per cent from the current rate of 3.75.
A Bench of Justices Arijit Pasayat and SH Kapadia dismissed DERC's appeal against the Appellate Tribunal for Electricity's order asking the DERC to maintain depreciation rate at 6.69 as was originally decided by the Regulatory body in February 2002 while issuing a tariff order for bulk supply. The tariff order had then been issued for five years. "In conclusion, we reiterate that in the present case because of inflation, we have to go by the cost of replacement instead of the historical cost," the Bench said. However, the court made it clear that it was only for five years and not for all times.
It also took note of the fact that the repair and maintenance policy of the Discoms had to take into consideration the technological changes and improvement in production method.
Upholding the contention of the discoms, the court said that the DERC's order was against the 1992 and 1994 notifications of the Ministry of Power for the entire power sector of India in this regard.
DERC had moved the Supreme Court after the ATE in September 2006 upheld the plea of private discoms to revert the depreciation rate to 6.69 per cent after the Commission had reduced it to 3.75 per cent.
In fact within a year of announcing the bulk supply tarrif, DERC's had in June 2003 reduced the depreciation rate. While reduring the depreciation rate, the DERC had argued that the discoms did not have to repay any loan and the decision was in consumer interest.
The Discoms had claimed that DERC's attempt to reduce the depreciation rate was mala fide and amounted to virtually committing fraud with them.
They had submitted that their investment in the business was made after the DERC announced the depreciation rate as 6.69 per cent. The Discoms claimed to have suffered losses running into crores of rupees on account of the reduction in depreciation rate.
What is Depreciation?
Depreciation is an annual amount created to be utilized for replacement of assets. As the fund is available as liquid cash, the discoms can use it as and when required.