Power distribution business to be privatised in Union Territories

Earlier in the week, the Centre said it would extend a Rs 90,000 crore funding line to distribution companies
Taking a leap towards enhancing private investment in power distribution companies (discoms), Union finance minister (FM) Nirmala Sitharaman on Saturday said the power distribution business in the Union Territories (UTs) would be privatised. This is the first such step after the draft amendments to the Electricity Act, 2003, were made public last month with the proposal of private participation in electricity distribution. 

She said this could provide “a model for emulation by other utilities across the country” which will lead to better service to consumers and improvement in operational and financial efficiency in power distribution. 

Delhi is the only Union Territory which has private power discoms — run by Reliance Infrastructure’s BSES and Tata Power Delhi Distribution in separate areas. Union Territories directly come under the central government. Hence, the path to privatisation is easier.

Earlier in the week, the Centre said it would extend a Rs 90,000 crore funding line to distribution companies. The Union power ministry said on Saturday the funding would be done in two tranches of Rs 45,000 crore each. It also decided to defer fixed charges of central power generation companies for electricity not scheduled to the discoms during the lockdown period. This could be paid without interest in three equal installments after lifting of the lockdown.

Discoms’ financials

  • Rs 18,000 crore Cumulative financial loss of state-owned discoms (including UTs)
  • 20% Average AT&C loss of  state-owned discoms (including UTs) as of December 2019
  • 18.11% AT&C loss of Puducherry
  • 47.88% AT&C loss of Jammu & Kashmir
  • Rs 12.85 crore Loss of Puducherry discom
  • Rs 2,675 crore Loss of J&K discoms
  • 9% AT&C loss in Delhi (industry estimate)
Data for no other UT available; AT&C stands for aggregate technical & commercial losses, which means power supply loss due to inefficient system; Source: UDAY Portal

Central power gencos and transmission companies have been asked to consider giving rebate of 20-25 per cent on power supplied (fixed charges) to discoms during the lockdown period. Discoms, in turn, have been requested to pass on the cost savings to consumers. Union minister of state for power and new and renewable energy R K Singh, in his online discussion with the power industry on Friday, said that Union Territories should have private power discoms. 

Barring Mumbai, Ahmedabad, Surat and Kolkata, no other city has private discoms. Against the average operational loss of 21 per cent of all state-owned power discoms, the losses of private discoms in these cities are in the range of 8-11 per cent. Odisha and Rajasthan have private distribution franchisees in select towns. 

The draft Electricity Bill, which was made public in April, has also proposed private power distribution franchisees. This paper had earlier reported that the ministry of power was asking states to join hands with private power distributors on a franchisee basis to improve their revenues.

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