The recent Delhi High Court order clearing the way for a Comptroller and Auditor General (CAG) audit of the privately-owned power distribution companies (discoms) in the national capital is a significant development in Delhi’s power sector since electricity distribution was privatised over two decades ago. While the immediate political debate revolves around transparency and accountability, the larger question is whether the judgment could initiate the next phase of power sector reforms in Delhi.
Soon after assuming office, Delhi Power Minister Ashish Sood sought a CAG audit of the three private distribution companies operating in the city. The proposal was resisted by the companies, leading to legal challenges. The High Court’s decision now opens the possibility of an independent examination of their financial records, expenditure patterns and claims regarding operational losses.
When the Aam Aadmi Party (AAP) emerged as a political force in 2012-13, one of its central allegations was that the Congress government had created an opaque privatization process that excessively benefited private distribution companies. Arvind Kejriwal himself frequently demanded independent audits.
On coming to power, the AAP government rather than revisiting the structure of privatisation focused on providing consumer relief through extensive electricity subsidies. Households consuming electricity within specified limits received free or heavily subsidised power. The crucial aspect of this arrangement, however, was that the burden of these subsidies was borne by the Delhi government through budgetary support rather than by the private companies themselves.
This model succeeded politically, however, it also meant that taxpayers effectively financed a substantial portion of electricity consumption. The BJP government’s argument in the matter is not about subsidies but transparency. The government says since it is paying large amounts to support consumers it should independently verify the financial health of the companies.
The audit would trigger a broader discussion about the relationship between public subsidies and private operators. Delhi spends thousands of crores annually on electricity subsidies. Taxpayers may reasonably expect stronger mechanisms to ensure that public funds are being utilised efficiently and that the benefits intended for consumers are not inadvertently supporting inefficiencies elsewhere in the system.
The High Court’s decision will now move the debate beyond the narrow question of subsidies to issues such as operational efficiency, procurement practices, capital expenditure, power purchase agreements, technical losses and return on investments. Such scrutiny could generate several outcomes.
Delhi’s privatisation experiment is often cited as a success because it significantly reduced aggregate technical and commercial losses, improved supply reliability and minimised power outages. Compared to the era before privatisation, consumers today enjoy far more dependable electricity. Yet successful privatisation does not eliminate the need for oversight.
In fact, as private participation in public utilities expands, the demand for transparency becomes even more important. Public confidence depends not only on reliable services but also on assurance that regulatory systems remain robust and independent.
Whether the High Court’s decision ultimately becomes a watershed moment will depend on what follows. An audit by itself does not constitute reform. Reforms emerge when findings are translated into policy changes, regulatory improvements, and institutional accountability. If the audit merely becomes another chapter in Delhi’s political rivalry between the BJP and AAP, its transformative potential will be lost.
On the other hand, if policymakers use the opportunity to undertake a comprehensive review of Delhi’s power distribution model, it would strengthen regulatory oversight and enhance public transparency. It could mark the beginning of the next phase of power reforms in the national capital. The focus may shift from the politics of free electricity to the economics of how electricity is actually delivered. That shift alone could prove to be the most significant reform of all.
Sidharth Mishra
Author and president, Centre for Reforms, Development & Justice
