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Delhi Power Distribution privatisation - a model for all cities to follow?
Written By murali772 - 24 December, 2011
Bangalore BESCOM Privatization Power Supply Citizen Reports Economy efficiency outsourcing
Linked here is a ppt presentation on the transformation of the Delhi power supply scenario, at least in those parts coming under Tata Power Delhi Distribution Ltd (TPDDL), over the 8 years since the taking over from the Delhi Vidyut Board (DVB). The information was obtained from TPDDL themselves. Some interesting highlights are:
- AT&C (aggregate technical & commercial) losses dropped by 75%, from 53.1% to 13.2%.
- Average retail tariff rose by 40%, from Rs 3.84 pu to Rs 5.38 pu, of which a 22% increase was allowed by the regulator just this September. This should be seen together with the increase in average power purchase price over the period, which was at 179.6% (from Rs 1.52 pu to Rs 4.52 pu). So, while the sale to purchase price ratio during the DVB reign was a whopping 2.53, it reduced dramatically to 1.19 at the end of the 8 years since the TATA take over.
- No of consumers went up by 69.1% (from 700,000 to 1184,000).
- Distribution Transformation Capacity in MVA went up by 116% (from 1926 to 4160)
- System reliability went up by 42.7% (from 70% to 99.9%) - meaning, I expect, the sales of gensets, inverters, UPS devices, batteries, converters, emergency lamps, voltage stabilisers, candles, match-sticks, etc must be dropping drastically.
Can there be a more compelling reason than all of the above for privatisation of distribution, particularly in cities, even with or without a most pro-active and go-getter MD like Mr Manivannan at the helm? After all, how much can he alone achieve given all of these constraints?
Well, the process has evolved over the years, from when the detractors - largely status quoists (some - on account ideological reasonings, plainly misplaced; others - out of vested interests), saw it all as doomed for failure - check this, and this. They will of course now point out to the reduction in the number of employees by 28.9% (from 5600 to 3981). However, that's only in the case of direct employment. As compared to that, the buoyancy that the economy attains, resulting from the ready availability of cost efficient power, is obviously leading to multi-fold employment generation in every other industry, power being a key infrastructural component affecting all of them.
The route for cities thus becoming clear, the route for rural areas can be any of the many models already available - a good one would have been the Hukeri (Belgaum dt, Karnataka) model, if not for the deliberate sabotage of it being carried out by the neta-babu combo in order to perpetuate their rule. Whatever, the route can't be the one adopted by BESCOM (and the other DISCOMs in Karnataka), supposedly to cross-subsidise the losses suffered in the rural networks, but essentially to cover up their inefficiencies (as also plain thefts), all in the name of farmers.
City loads and rural loads have totally different characteristics, and unless these are separated and managed, neither can be met satisfactorily. But, the important question that arises is do you want to meet the needs satisfactorily, or do you want to perpetuate your vested interests?
Muralidhar Rao
COMMENTS
the story behind the recent Delhi power outages
murali772 - 29 June, 2016 - 14:30
State-owned NTPC Ltd’s threat earlier this month to cut off power supply to two units of Reliance Infrastructure Ltd supplying to large parts of Delhi due to delay in payments point to the financial distress slowly gripping private power distribution companies in the capital, which are now pinning hopes on central and state governments coming to their aid.
Reliance Infrastructure arms BSES Yamuna Power Ltd (BSEL YPL) and BSES Rajdhani Power Ltd (BSES RPL) and Tata Power Delhi Distribution Ltd are together saddled with more than Rs.36,000 crore of power purchase cost yet to be recovered from consumers due to delay in power tariff revision.
The companies now want not just government intervention in a debt rejig, but concerted efforts to reduce their power purchase cost, including replacement of costly long-term power purchase agreements that were signed by their predecessor Delhi Vidyut Board (DVB) before its privatization in 2002 with new ones from efficient and cost-effective power plants.
Companies believe that joining the Ujwal Discom Assurance Yojana (UDAY) approved by the Union cabinet on 5 November 2015, which was originally meant for state-owned power distributors, will help the private sector too to tide over their financial distress and could even lower power tariff by 75 paise per kilo watt hour.
“At the end of the day, the benefit of financial and operational efficiency achieved from UDAY will go to consumers, whether power is supplied by a government entity or a private one. Consumers in Delhi should not be deprived of its benefit,” said Praveer Sinha, chief executive officer (CEO) and managing director of Tata Power Delhi Distribution.
- - - At present, every unit of power supplied adds to distributors’ debt burden because the regulated power tariff charged to the consumer does not reflect the actual cost of power purchase, according to people familiar with the companies’ discussion with the governments.
State electricity regulatory commissions have to strike a delicate balance between avoiding tariff shocks to consumers and preventing unallowed costs (called regulatory assets) building up on the books of power distributors, which reduce their ability to give quality service. An email sent to the Delhi Electricity Regulatory Commission (DERC) on Monday remained unanswered. Cash flow problems affecting distribution companies’ ability to buy power and to invest in infrastructure maintenance leads to supply disruptions.
Delhi power minister Satyendra Jain on Saturday alleged that power cuts in the state are due to poor maintenance, adding that consumers should be compensated for outages of more than two hours. The state has approached DERC in this regard, he said.
Private power distributors fare way better than state-owned ones in operational efficiency. Sinha of Tata Power Delhi Distribution said the company has lowered its AT&C losses to less than 9% of the total units of electricity supplied from about 53% at the start of operations.
For the full text of a highly readable report (emphasis added by me) in LiveMint, click here.
So, now the reasons for the power outages in Delhi become clear. And, what's Satyendra Jain talking about consumers having to be compensated for outages, by the discoms, when he can't bother to clear the huge dues to them? At least now, he would do well to avail the UDAY scheme benefits and ensure a proper deal to the discoms, so that they can upgrade their infrastructure, and in turn offer an even better deal (it's already far better than what's on offer from govt discoms) to the consumers.
It may also be of interest to note that, unlike the government-owned BESCOM (as well as other Karnataka discoms), which can pass on its financial burden to KPCL (the government-owned generation company), paying it on an average in 13.5 months (check here), the courts reversed their own earlier ruling denying the Delhi discoms the "privilege", once the private players came into the picture (check here). So, that option is closed now.
kbsyed61 - 10 October, 2012 - 21:40
Courtesy - Indian Express
"...Political parties, old and new, should consider the many things people want, rather than what they despise, and create a platform that seeks more than “yes or no” answers..."
shekhar_mittal - 26 December, 2011 - 17:28
what is the point of privatisation if one government monopoly is replaced by 2 private ones? This is no competition. How is this different form just making the govt agency completely independent (i mean financially) ?
Who has written this presentation? Do you trust the source?
Every house I know of in Delhi still has a inverster/generator. Power supply is still not trust-worthy.
murali772 - 27 December, 2011 - 02:17
what is the point of privatisation if one government monopoly is replaced by 2 private ones? This is no competition.
Power distribution is a natural monopoly area, and consequently the only way you can achieve accountability is through a comparison of the performances of the different players across the city, and pulling them up for shortcomings, through the regulatory body/ consumer forum etc.
How is this different form just making the govt agency completely independent (i mean financially) ?
As long as it is a government agency, complete independence is just not possible, and that precisely is the problem.
Who has written this presentation? Do you trust the source?
The source is TATA power itself. So, the feedback from Delhi residents is most welcome, and essential as part of the process of making them accountable.
Every house I know of in Delhi still has a inverster/ generator. Power supply is still not trust-worthy.
You are talking of the areas covered by TATA Power too? In which case, I expect the TATA officials, with whom I am in touch, will respond. And, that's exactly how we can perhaps use PRAJA as the interface between the consumers and the service providers, and help make things better for everyone. And, do forward this to all the citizens of Delhi you are in touch with.
murali772 - 25 May, 2015 - 09:58
The AAP - LG stand off originated over the issuance of "letters of comfort" to the Reliance discoms' banks, by the government (it is a 49% shareholder in both), against the huge monies owed by them to the discoms.
Now, AK's election strategy was to paint the big business houses as the villains, who totally controlled the government. The aam aadmi mindset, fed on decades of Nehruvian Socialism, readily gulped it all down too, with the the past shenanigans of business houses like Reliance helping to add to that sentiment.
AK & Co have more specifically been alleging wrong doings by the Reliance discoms (not a word has been said against the Tata company, and not a word in favour, either), which they promised to expose through a CAG audit, immediately on gaining power. Now, after 100 days in power, a "report card" released by them lists "performance audit of power discoms by CAG" as "partially implemented". Apparently, there's not enough there to nail Reliance, since otherwise one would have expected them to be tom-tomming it all over town.
If that's indeed the case, then they owe the Reliance discoms all of the Rs 20,000 cr odd accumulated under the "regulatory assets" head (which is essentially postponed payments and interest thereon), non-clearance of which has been badly crippling the discoms' operations. In such a scenario, making allegations against a senior official, who recommended issuance of the "letter of comfort", of being a stooge of Reliance, is nothing short of blasphemy.
Besides, what is called for immediately is to raise the tariff levels (perhaps more so at the higher consumption levels, where the resistance may no be too high considering the better quality of supplies, leading to lower dependence on far costlier genset and such alternate arrangements) in order to wipe out the huge backlog. However, this goes against AK's talk of reducing tariffs, and thereby the dilemma, and, to cover it all up, the drama.
Their approaches, to some basic issues involved too, are rather quixotic, one needs to add. They are, for instance, talking of setting up a captive thermal power plant in Delhi, even as Delhi is rated as amongst the most polluted cities in the world. Besides, a white paper published in their own web-site (accessible here), had clearly identified the route to containing power costs as to source bulk power from UMPP (ultra mega power projects)'s in the private sector, than from NTPC. Of course, this will call for timely payment arrangements, which perhaps they don't quite believe in, and hence the rejection of that option.
The approaches to other issues too, as seen from their "report card", are indicative of a staidness which will not quite help given the enormity of the challenges faced. As such, while there is indeed some merit in the argument for more powers for the elected government, one can't help but go by the charge that AK & Co are more on the lookout to cover up their incapacity to live up to the tall promises made to the electorate.
So, while admittedy, it may be too early to judge them on issues other than power, in the case of power, it may be a case of an undoing of a good model.
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