Maharashtra tweaks power distribution franchisee model

Maharashtra has tweaked its power distribution franchisee (DF) model, which is currently in place in Bhiwandi, Nagpur, Aurangabad and Jalgaon, in a bid to ensure additional payment security by franchisees.

As per the revised policy brought in by the Maharashtra State Electricity Distribution Co (MahaVitaran), DF would have to pay upfront six months’ collection of cash in advance in addition to bank guarantee. Franchisees also have to open an escrow account of 90 per cent of collection.

Further, DFs must have an experience of handling 40,000 consumers. However, MahaVitaran has clarified any existing distribution licensee in India may participate in the tender process, irrespective of the number of consumers served.

The existing operational DF must have no outstanding dues excluding disputed amount. These new changes have been made while inviting expression of interest for the appointment of DF for the Shil-Kalwa-Mumbra area of Thane district, where transmission and distribution losses (T&D) are quite high. The revised bid condition would be applicable for similar projects to be undertaken by MahaVitaran in other parts of the state.

“During earlier distribution franchisee projects, DF was required to give bank guarantee but it was not binding on them to deposit six-month collection cash in advance,” Ajoy Mehta, managing director of MahaVitaran, told Business Standard.

“DF will also have to provide an escrow arrangement for 90 per cent of the collection amount in revenue account. DF will deposit an advance payment of Rs 45 crore of which Rs 40 crore will be against the payment security to MahaVitaran in the first year of operations and Rs 5 crore will be security against implementation of minimum investment plan in first five years of operations,” Mehta said.

According to him, DF would have to invest a minimum amount of Rs 10 crore over a period of first five years in a way that at least Rs 2 crore to be invested every year for the first five years of the contract period.

MahaVitaran’s distribution franchisee model, which has come up for discussion at a meeting convened by the Planning Commission on Tuesday to discuss the 12th plan capacity addition, has led to a reduction in T&D losses. “In the powerloom town Bhiwandi, Torrent, which is a DF, has succeeded in bringing down T&D losses to 19 per cent from 42 per cent when it took over the distribution network,” Mehta said.

Similarly, Spanco has lowered T&D losses to 35 per cent from 36 per cent in Nagpur, while GTL has brought down T&D losses to 33 per cent from 35 per cent in Aurangabad. In Jalgaon, the Crompton Greaves’s efforts have paid off as T&D losses have come down to 36 per cent from 41 per cent, he added.