Privatise power supply: Niti Indian think-tank feels it is a way out for debt-ridden discoms

NITI AAYOG proposes privatisation of power supply in its draft National Electricity Policy. AGGREGATE debt of discoms was `4.3 trillion at 2015 March-end. ANNUAL revenue loss is `60,000 crore. AIM ALSO to see customers have freedom to choose private pow

The supply of electricity could go into the hands of private parties, if a Niti Aayog proposal to the Centre is adopted. Distribution companies will own the grid under this arrangement.

If this proposal is carried through, customers will have the freedom to choose their electricity distributor, as is being done in the telecom sector. The proposal is contained in the draft National Electricity Policy and is aimed at eliminating the debt burden on discoms, and says the way to do it is to private the purchase of power. Niti Aayog said the fundamental cause of discoms going bankrupt is the absence of commercial pressure on them and political pressures to provide electricity either free or at highly subsidised prices to certain segments of society. The aggregate debt of all discoms in the country is `4.3 lakh crore, and annual losses stood at `60,000 crore at the end of March 2015.

In a major development, electricity boards of southern states on Monday reached an agreement to simplify procedures to purchase power from surplus states and constituted a committee to prepare guidelines.

They also decided to cooperate with one another in power generation, distribution and supply, at a meeting of the Southern Region Power Committee at Vidyut Soudha here.

At present, states that want to sell surplus power and those that want to purchase it have to do their transactions through the power exchange.

The information should be given a day in advance.

Under this arrangement the surplus state cannot automatically sell the excess power in the open market immediately.

The state which is in dire need cannot purchase its requirement immediately, and has to evaluate demand a day in advance.

In the proposed agreement, the southern states will enter into mutual agreements and transact power through the Southern Region Load Dispatch Centre.

Committee chairman D. Prabhakar Rao, chairman and managing director of Transco, said the process would be completed in an hour and the process would be online.

The surplus and shortage details will be exchanged online and the Indian Energy Exchange rates will apply. sale of electricity would pass on to private agents.

The private firms would contract with generation companies to buy electricity and sell it to the final customers. Electricity would be supplied from the generating station to the point of consumption on the transmission and distribution infrastructure at charges to be determined by regulators.

Under this arrangement, the Niti Aayog sees distributors competing for customers.

Niti Aayog said the separation of the grid from distribution of electricity could allow captive generation to turn into an effective source of power.

It said the Electricity Act, 2003 had freed captive generation from all controls including the licence requirement

Southern states will sign agreements without going through the tedious process of signing power purchase agreements frequently.

The member states of the Southern Region Power Committee and techno economic clearance from the Central Electricity Authority.

Once captive generation is offered smooth access to the grid, its potential can be fully exploited.

Niti Aayog said when discoms are in poor financial condition, generation companies fear that they would be unable to make good on their promised payments.

In turn, generation companies refuse to enter into power purchase agreements with discoms.

The result is that the latter are unable to provide electricity even when customers are able and willing to pay for it.

Sooner or later, the government has to step in to bail out the discoms the Niti Aayog said. accepted the initial draft and a committee was formed under the chairmanship of Mr S.R. Bhatt, member-secretary to prepare the final draft.

The states will meet in Kerala on August 20 to take a final decision.