NTPC-Power Grid JV likely to be distribution sector operator

The Centre’s latest plan to form a national electricity distribution company is likely to be a distribution sector operator (DSO), with overarching responsibilities of sectoral reforms and technical expertise. Officials said the company would be involved in the consultancy business and not exactly intervene in the business of state-owned power distribution companies (discoms).

Last week, India’s two leading public sector utilities — NTPC and Power Grid Corporation of India — formed a joint venture to set up a National Electricity Distribution Company.  Senior executives said a committee had been set up that is designing the road map for the company. “It would also need approvals from the NITI Aayog and the Department of Investment and Public Assets Management,” said an executive.

A statement by the spokesperson of the Ministry of Power last week said: "An agreement has been entered between Power Grid and NTPC on June 21 for the formation of a JV company on a 50:50 equity basis for setting up National Electricity Distribution Company (NEDCL). The main objective of the JVC is to undertake the business for distribution of electricity in distribution circles in various states and union territories of India and other related activities."

Senior government officials dismissed the notion that the new company would function like an alternative discom. Electricity in India is in the concurrent list, wherein power distribution is a state subject. Barring few areas in some states, Delhi, and Mumbai, discoms are owned by the state governments but are financially beleaguered. Losses of state-owned discoms grew over 40 per cent to Rs 21,658 crore at the end of FY19. 

“There is not one agency that can be the guiding force for reforms that discoms need to take... Operational efficiency can be improved with technological intervention. These companies are adept at doing it,” said an official.

A senior executive said the joint venture would first be doing consultancy work for the states. “The final contours of the company’s work profile are being decided. We are also waiting for amendments in the Electricity Act. After that, the JV could look at being an electricity supplier,” he said requesting anonymity.  

Amendments to the Electricity Act suggest separation of content and carriage business in the power distribution - i.e the infrastructure builder for power supply and the supplier to consumer would be two separate companies. This would bring more competition in the power distribution sector with more than one power supplier. The Act is yet to be tabled in the Parliament. 

The move to have a DSO comes at a time when the existing reform scheme UDAY has failed to induct operational reforms, as indicated by several agencies. Launched in 2015, it aimed at turning around the state owned discoms financially and operationally. While the financial part was concluded with states taking over the losses of discoms and issuing bonds, operational front is facing challenges.