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Reorganised Power Sector of Gujarat Turns Around, Shri R V Shahi, Former Secretary, Ministry Of Power

Reorganised Power Sector of Gujarat Turns Around
[R V Shahi's Weekly Column for Infraline, October 29, 2007]

The Electricity Act-2003 has provided for reorganization of State Electricity Boards into generation, transmission and distribution companies. Even before the Act came into existence in June 2003, it may be recalled that, as many as eight states namely Orissa, Haryana, Andhra Pradesh, Uttar Pradesh, Karnataka, Rajasthan, Delhi and Madhya Pradesh had enacted their own Electricity Reform Acts during 1995 (when Orissa notified its Act) and 2000 when (Delhi and Madhya Pradesh enacted their legislations). All these State Reform Acts, though with some differences here and there, have provided for reorganization of their respective State Electricity Boards into generation, transmission and distribution companies. All these Acts have also provided for constitution of State Electricity Regulatory Commissions with the task of, interalia, fixing and notifying tariff. As a result of these state level legislations, these states had restructured their Electricity Boards already or some of them were in the process of restructuring them.

Electricity Act 2003 has made a mandatory provision in the Chapter-XIII - Section 131 that the State Electricity Boards shall be reorganized. Section-131 (i) and (ii) are extracted below:

131. (i) With effect from the date on which a transfer scheme, prepared by the State Government to give effect to the objects and purposed to this Act, is published or such further date as may be stipulated by the State Government (hereafter in this Part referred to as the effective date), any property, interest in property, rights and liabilities which immediately before the effective date belonged to the State Electricity Board (hereafter referred to as the Board) shall vest in the State Government on such terms as may be agreed between the State Government and the Board.

(ii) Any property, interest in property, rights and liabilities vested in the State Government under sub-section (1) shall be re-vested by the State Government in a Government company or in a company or companies, in accordance with the transfer scheme so published alongwith such other property, interest in property, rights and liabilities of the State Government as may be stipulated in such scheme, on such terms and conditions as may be agreed between the State Government and such company or companies being State Transmission Utility or generating company or transmission licensee or distribution licensee, as the case may be :

Provided that the transfer value of any assets transferred hereunder shall be determined, as far as may be, based on the revenue potential of such assets at such terms and conditions as may be agreed between the State Government and the State Transmission Utility or generating company or transmission licensee or distribution licensee, as the case may be.

Since, this is one of the most important structural changes provided in the Act, and since electricity is a concurrent subject and also the fact that this change involved all states and large number of employees and stakeholders, the Act has also provided for a special dispensation that allows for continuation of the Electricity Board beyond the mandatory period of one year. This, however, was not left totally to the state governments to be decided by them. Section 172 of the Act, which deals with transitional provisions, has kept a scope that the state government may, by notification, authorize the State Electricity Boards to function as the state transmission utility or a licensee for such further period beyond one year as may be mutually decided by the Central Govt. and the State Government.

It is on the basis of this provision in the Act that the Central Govt. from time to time has been allowing the extensions to the states for continuing with their Electricity Board. Each time such an extension has been allowed, it has been on the basis of an assurance by the concerned state government that it needs such an extension for valid reasons and that the preparation for reorganization is in progress. It is expected that reorganization of Electricity Boards throughout the country would be completed soon because of the merits and benefits which the states will themselves see from examples of other states.

Reorganization of State Electricity Boards was also an issue which the Left Group in the UPA had raised for a review. It had been agreed with them that the reorganization of Electricity Boards wherever it has already been done will be studied in detail and outcomes of the restructuring will be evaluated. The study will also cover such states as have not reorganized and the way they are functioning. The Ministry of Power got a very comprehensive study carried out, over a period of about one year, by Indian Institute of Public Administration (IIPA). The study team consisted of more than ten renowned experts drawn from different fields of industry and other sectors. They studied a number of Electricity Boards which had been organized prior to Electricity Act 2003, those organized after the Act and also those which had not been reorganized. The IIPA submitted a very detailed report to the Ministry of Power in December 2006. This study has, beyond doubt, validated that regrouping into generation, transmission and distribution companies has, by and large, several merits. However, the study cautions that mere reorganization will not help unless reorganized companies are properly professionalized, suitably staffed with appropriate placements at the level of the Board and senior positions of these companies as well as with suitable empowerment and delegation of authority to these companies. Wherever this has been done properly, the study has found out that, the outcomes have been positive and these states are doing comparatively much better.

The State of Gujarat decided to restructure its Electricity Board after Electricity Act 2003. Therefore as compared to many other states, they have had comparatively lesser time after reorganization, i.e. about three years. Even during this short period, the state has not only shown remarkable improvements on all the fronts but, infact, the electricity sector of Gujarat has achieved a turn around. The erstwhile Gujarat Electricity Board has been restructured into seven corporate entities. These are:

  1. Gujarat Urja Vikas Nigam Ltd. - This is a holding company for the other subsidiary companies and it will carryout the activity of trading also

  2. Gujarat State Electricity Corporation - This company will have the responsibility of power generation including operation of existing plants and development of new plants

  3. Gujarat Energy Transmission Corporation - This company will be the State Transmission Utility (STU)

In addition, four distribution companies have also been set up which will take care of electricity distribution in different geographical areas.

  1. Uttar Gujarat Vij Company

  2. Paschim Gujarat Vij Company

  3. Madhya Gujarat Vij Company

  4. Dakshin Gujarat Vij Company

The total number of consumers in Gujarat is of the order of about 9 million - the largest number of consumers are in Paschim Gujarat (3.2 million) and in the remaining three companies in the range of 1.7 to 2.2 million. The existing installed capacity for power generation in the state is slightly less than 10,000 MW. Gujarat is one of the very fast growing economies in the country - in the range of 11 to 12%. In the Eleventh Plan period (2007-2012) the additional capacity required is more than the total existing capacity, of the order of 10,200 MW. The state has reported that in October 2007 the maximum demand of power met was about 9,000 MW and unrestricted demand would have been more than 12,000 MW. The period of mismatch between demand and supply is likely to continue through the Eleventh Five Year Plan. The preparations are such that during the years 2011 and 2012 the demand and supply gap would be negligible, most likely in 2012 the capacity installed would be of the order of over 20,000 MW as compared to capacity requirement of the order of 19,000 MW. It is relevant to mention that these figures are inclusive of state owned generation capacity, power that they would draw from IPP and power from central generating companies.

During the period 2002-2006, I could carryout regular reviews with senior officials of Gujarat almost every six month either in Delhi or in Gujarat. On the electricity distribution front, Gujarat has been one of very few states which seriously implemented the Government of India Accelerated Power Development Reform Programme (APDRP). I recall visiting Baroda in the year 2004 and it was quite impressive that within a period of one year, Baroda had established GIS System and with the Geographical Mapping they were in a position to track and rectify faults and also take care of consumer complaints through the GIS Mapping System. Subsequently, many states went in for GIS Mapping, but historically Gujarat was one of the very few which recognized the importance of the system and implemented the same right in the initial stage, with rewarding results.

The state also came out with a very novel scheme called Jyotigram Yojana. It aimed at 24 hour supply to villages with a minimum of 8 hours three phase power to agriculture. The works executed under the Jyotigram Yojana include almost 55,000 Kilometer HT Lines, 22,000 Kilometer of LT Lines and more than 18,000 distribution transformers, about 1700 new feeders, covering over 18,000 villages and 9,700 hamlets, with a project cost of about Rs. 1,250 crores. Prior to this scheme the power supply was characterized by (i) 8 to 14 hours of 3 Phase supply, (ii) 10 to 12 hours of Single Phase supply and (iii) 3 to 4 hours of no supply. Post this scheme which was completed in 2006, significant improvements have happened. The power supply now could be characterized by (i) 24 hours of 3 phase supply to Jyotigram Yojana feeders, (ii) minimum 8 hours of 3 phase continuous supply to agriculture feeders, and (iii) single phase power supply in lean hours through specially designed transformers which provide single phase supply and prevent use of phase converter. 24 hour power supply has promoted cottage industry, has helped villagers in setting up local diaries, refrigerators in villages have enabled them to stock milk and vegetable items, it has helped extensively in improving the quality of education and health services. The whole scheme has transformed the rural scene from the viewpoint of quality of life as also in respect of economic activities.

On the IT front, Gujarat has been one of the most progressive and forward looking electricity sector. Some of the important initiatives include:

  • Full fledged ERP solution in power sector.

  • e-Urja provides real time information on various parameters.

  • GIS Maping in 15 towns and cities.

  • Spot billing through hand held machines.

  • All Zonal offices and power stations linked with headquarters through WAN.

  • The CAS collection centers all computerized.

Other states which have deployed I.T. in power sector to a significant level include Andhra Pradesh, Karnataka, Haryana, Rajasthan, West Bengal, Maharashtra and Tamil Nadu. Some of the important consumer facilitations include 24 hour payment facility at specified centers, Consumer Care Centers, Trouble Call Management Centers for 24 hour access and the facility of bill collection through Post Offices, Co-operative Banks, Co-operative Societies and Private Agencies. It needs to be mentioned that this paper may not have captured all that has been done and is being done. Attempt has been to highlight how states have started emphasizing on Distribution reform and giving attention to consumer services. Till just five years back, distribution remained a neglected segment and in five years, in most states, there is visible change.

In the last three years the state has been able to bring down the transmission and distribution losses substantially - from about 31% in 2003-04 to about 22% in 2006-07. Except for Paschim Gujarat in which the transmission and distribution loss is more than 36%, in the other companies it is in the range of 18 to 20%. The overall transmission and distribution loss of 22% in 2006-07 is as compared to the target of 25.8%. The target is 18.5% by 2010-11. Seeing the performance it is quite likely that they will achieve 18.5% by 2008-09 and less than 15%, by 2010-11.

Cash collection has improved by 42% in last four years without tariff increase and the subsidy component remaining fixed. In the year 2003-04 the revenue was of the order of Rs. 9,200 crores which has improved to about Rs. 13,200 crores. The most impressive performance of the sector in Gujarat is demonstrated by its turn around. In the year 2003-04 the loss was of the order of Rs. 1,932 crores which reduced to Rs. 927 crores in the year 2004-05. During the year 2005-06 the sector turned around. There was a profit of Rs. 202 crores which further improved to Rs. 220 crores in 2006-07. In a period of three years, to have achieved this magnificent success is remarkable. Several reviews and discussions with the Managing Directors and Chair persons of these companies during which I had the occasion to personally interact, revealed the intensity of their involvement in the process of reform and in completion of various projects and fulfillment of various targets. A reorganized structure not only lends itself to a committed involvement of senior level functionaries into a focused approach towards targeted activities, but it also brings about a greater sense of accountability. This is what is the essence of the reorganization of State Electricity Boards as stipulated in the Electricity Act 2003. Recently, I have been involved in the process of identifying performing states and performing state utilities to recognize them and honour them. In two such successive events Gujarat had the place of pride. In one case, the Infraline Energy Award (award given on October 12, 2007), for overall performance of power sector, went to Gujarat. And, last week a different panel of judges again identified Gujarat as a performing state, and in an event organized by India Tech, they were honoured.

Andhra Pradesh, Gujarat, Karnataka and in last two years, Maharashtra, Haryana, Rajasthan, have demonstrated that the reorganized entities have achieved definitely positive outcomes. The degree of success varies from one case to another depending on what other actions have been or have not been taken. It must be realized that one initiative of reorganisation alone may not be sufficient to derive the full benefit. Success of reorganization of the Electricity Board will depend on how seriously the state government also undertakes professionalisation of these Boards. Obviously, areas where state government support is needed such as in the matter of control of theft of electricity, providing autonomy to these entities in their working, full support by way of implementation of decisions of Regulatory Commissions, are some of the very important inputs which would be essential for success of any reform or restructuring initiative. A few other states which I propose to cover for similar analysis include Andhra Pradesh, West Bengal, Karnataka, Haryana, Maharashtra and Orissa. These states have also achieved varying degrees of success. About Delhi I have already written couple of papers recently.

Copyright: R.V. SHAHI