Which State Owes How Much
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has yielded positive results in many cities, including Delhi, Mumbai, Kolkata and Ahmedabad. Before it was privatised in 2002, AT&C losses in the national capital were at a high 53 per cent and the government was subsidising discoms to the extent of ` 12,000 crore every year. After privatisation losses came down, and today Delhi has one of the lowest AT&C losses among discoms in the country at just 8 per cent.
“Delhi is a prime example of how privatisation works in the sector. We have invested in technology and improved service quality. Not just us, private discoms in general have displayed high efficiency standards. Our track record makes for a good case for privatising more discoms in the country. The biggest advantage of privatisation is it brings in greater accountability, which in turn improves efficiency,” says Sanjay Banga, President, Transmission and Distribution, Tata Power.
“UDAY did not succeed and anything we do in future should take into account the lessons from it,” says Former Chief Economic Adviser Arvind Subramanian. “Privatisation of discoms is definitely one of the ways to solve it, but expectations need to be realistic. The fact of the matter is that the underlying politics of power has not changed significantly.”
Everything comes down to making it conducive for discoms to do business through policy certainty and autonomy in pricing decisions. The power connection portability concept that the new RLRBSD scheme seeks to facilitate and for which the prevalent Electricity Act 2003 needs to be amended, would also work only when more players, including from the private sector, join the ring to give more options to consumers. Without these enabling provisions, even privatisation may not work.
“Any model succeeds only when the overall ecosystem is aligned, including regulatory certainty and availability of financial support,” says Amal Sinha, CEO, Rajdhani Power. “There should be no discrimination between private and public sector discoms. Give the latter the same level of freedom and they will do well too.”
One of the potential solutions that has gained currency in recent times is direct transfer of subsidy into bank accounts of consumers. Increased penetration of formal banking through Jan Dhan accounts in the society makes it, at least theoretically, a plausible alternative. This can open the doors for discoms to raise tariffs.
“Entitlements are difficult to do away with — power subsidy for agri sector has to be given. Around 100 units for households are required. We should look at eliminating subsidies and replacing them with cash transfer,” says former bureaucrat Ajay Shankar who played a key role in the enactment of the Electricity Act 2003. “We should not shy away from privatisation, especially in states where governance is weak. Also, multiplicity of tariff has to be done away with.”
Cross-subsidy acts as a double whammy for discoms. Supplying power to industrial consumers is cheaper than to agricultural or residential users, yet the tariff is the highest for them. For the latter, cost for discoms is high but tariff is low, leaving them with no other choice but to squeeze industrial consumers.
“It makes manufacturing in the country uncompetitive,” says R.C. Bhargava, Chairman of Maruti Suzuki India Ltd. “India has one of the highest rates of industrial power in the world. It undermines our aspiration to become a manufacturing superpower.”
But unlike LPG, implementing direct cash transfer for power may not be easy. “It will be difficult as it is a different ballgame in the power sector compared to LPG,” says Shubhadeep Sen, Chief Financial Officer, Gujarat Urja