State, private power players to set up joint platform

To take up issues with central & state govts, and regulators

Power sector players have joined hands to form a Forum of Distribution Utilities (FDU) to represent the issues faced by them with  central and state governments and regulatory authorities.

FDU, which will comprise both state and private distribution utilities, will function as a platform to share best practices in the power sector, exchange experiences on technology upgradation processes, efficiency improvement, solutions for operational issues, facilitate interaction with academia and research institutions, development of standards and capacity building.

Recently, former secretary of Department of Industrial Policy and Promotion Ajay Mathur, former chairman of PowerGrid Corporation R N Nayak, former chairman Central Electricity Authority Rakesh Nath and TERI director general Ajay Mathur made a presentation to the forum of regulators (FOR) and made a plead to facilitate hand holding to FDU. Besides, they also requested FOR to provide  support in the form of its intellectual inputs, guidance and base corpus of Rs 30 lakh for initiating the activities.  

An FDU proponent, who did not want to be identified, told Business Standard, “Since the enactment of the Electricity Act, 2003, the generation and transmission sectors have witnessed significant growth. After unbundling, there are around 60 distribution companies in the country, but most of them remained state-owned except in a few pockets,  including Mumbai, Delhi, Ahmedabad, Surat and Kolkata. Despite distribution being a regulated business, with 15.5-16 per ent return on equity, state-owned discoms have not fared well. Only private entities stood profitable.”

This apart, the efforts made through distribution franchise model have not succeeded given the paucity of funds for capital expenditure.

He argued that the establishment of FDU is important as the cumulative losses among all state-owned discoms is worth Rs 3.80 lakh crore (as on March 15, 2015) with an aggregate debt of Rs 4.83 lakh crore.  The average loss per annum is Rs 60,000-70,000 crore and 90 per cent of the losses are in Rajasthan, Uttar Pradesh, Tamil Nadu, Harayana, Madhya Pradesh, Andhra Pradesh and Jharkhand. Further, losses in Rajasthan, Uttar Pradesh and Tamil Nadu are estimated at Rs 15,000-16,000 crore per state per annum.

A Power ministry official said the poor performance of  distribution utilities is due to high aggregate transmission and commercial losses (AT&C) (more than 30 per ent), over 50 per ent gap in supply cost and revenue realization, poor financial and operational management of the discoms, poor distribution network infrastructure, lack of metering and poor maintenance leading to breakdowns.