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The stock of Tata Power, one of the power distribution companies in Delhi, was down 2 per cent last week. According to newspaper reports, a draft report of the CAG has allegedly found the private power distributing companies in Delhi guilty of inflating costs that are taken into account to fix power prices. Tariffs set by the Delhi Electricity Regulatory Commission allow Tata Power complete pass-through of costs plus 16 per cent return on equity.
If the final report, when released, is on similar lines, a cut in power tariffs in the nation’s capital cannot be ruled out. This could impact the company’s revenues from its power distribution business. As against net profit of ₹168 crore from consolidated operations, Tata Power Delhi Distribution, the company’s most profitable subsidiary, reported net profit of ₹336 crore in 2014-15.
While the company’s standalone business — power generation, transmission and distribution in Mumbai — is profitable, two of its subsidiaries, Coastal Gujarat Power (CGPL) and Tata Power Solar Systems are loss-making. The CGPL-run Mundra plant has been the biggest drag on company finances. While the loss from the plant declined 40 per cent to ₹898 crore in 2014-15, thanks to the declining international coal prices; tariff concerns remain. The company has petitioned with the power sector regulator for higher tariffs.
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