Discoms should be consumer-centric, bring more pvt investment: House panel

A parliamentary consultative committee for the power sector has suggested increased private participation in the distribution segment, along with direct benefit transfer (DBT) of electricity subsidy, to improve the financial health of the sector.

The committee lauded the Centre’s flagship schemes aimed at improving the power supply infrastructure. It also pointed out that the sector needed to be made more consumer-centric.

“There is a general lack of consumer service culture within power distribution companies (discoms) and their operations are not oriented towards enhancing customer experience. Further, due to poor levels of governance, discoms fail to ensure adherence with supply code and standards of performance,” the report said.

The committee said the core issues faced by discoms are high-cost structure, insufficient and irregular revenue stream, high operational losses, and unsustainable levels of overdue and debt.

One of the suggestions by the committee was increasing private participation in power distribution by way of content-carriage separation.

“One of the solutions for sustainable business of discoms is to introduce competition in retail supply and allow multiple suppliers in the distribution business by segregating the supply-and-wire business,” said a report by the committee.

The report dated January 18 has been reviewed by the paper. Content-carriage separation entails the separation of infrastructure and supply business of discoms. While the infrastructure ownership remains with the state-owned distribution utility, the power supply licences are given to several private players. This entails greater choice of suppliers to consumers and increased private investment in the sector.

The committee report further said, “The most critical reform measure would be to increase private participation in retail supply. The discoms may continue to own and operate the wires infrastructure, which is a profitable business by its monopoly nature and the supply business may be opened up for multiple private players.”

The Ministry of Power included content-carriage separation in its 2018 amendments to the Electricity Act, 2003. But in the new set of amendments in 2020, it has been removed.

The committee has asked the state governments to take up content-carriage separation of existing power discoms.

“Such a move will allow many supply companies to operate in an area competing with each other. To keep a check on tariff from multiple suppliers, a price cap may be notified for electricity tariff,” said the committee.

The power ministry has introduced several amendments to the Electricity Act, 2003, to enable a turnaround of discoms in 2021. These include encouraging states to tie-up private franchisees for power supply, introduce DBT of electricity subsidy, and phase out cross-subsidy charges levied on industrial consumers.

The committee has supported all these proposals, adding these suggested reforms might cause the transition of the distribution business “from a monopoly to competition in retail supply, public–private partnership/franchisee in identified areas, and use of smart meters for turning around the poor financial health of discoms in the near future”.

The committee said several flagship schemes of the Centre for power supply infrastructure improvement have shown good results — both for urban and rural power reforms.

This paper reported recently that the integrated power development scheme (IPDS) achieved a high success rate in the seven Northeast states, with 90 per cent completion as of January 2021. Under system strengthening, which entails construction of last-mile power supply infrastructure, the physical progress is 86 per cent, said senior officials — the highest across the country. The system strengthening portion of the IPDS will conclude in March 2021. Officials in the Ministry of Power said 100 per cent progress will be achieved under system strengthening by the end of the current financial year.