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Privatisation of Delhi Power Distribution : A Satisfying and Rewarding Initiative, Shri R V Shahi, Former Secretary, Ministry of Power

Power supply in Delhi, we may recall, used to be a matter of serious concern not only for the people who lived in Delhi, including me, but also for power professionals, Government Administrators, politicians and media. I remember the days when the DESU (Delhi Electric Supply Undertaking) was the organisation handling generation, transmission and distribution of electricity. All of us in the power sector and also those in policy making levels in the Government felt highly disturbed that we were not able to fix the power problems even in the capital city of the country, let alone the whole country. The nature of supply of power was so unreliable and erratic that, at the request of Government of Delhi, Ministry of Power had set up a Task Force to monitor the supply of power in the city with a view to providing necessary co-ordination with different concerned agencies. As Director (Operations) on the Board of NTPC, I was also a Member on this Task Force during the period 1991-94, till the time I moved to Mumbai as Chairman of BSES. The analysis during these deliberations of the Task Force used to reveal that power could be brought at the doorstep of Delhi from various generation sources, but the real problem lay in the distribution system.

It is a fact that Delhi always received top most priority in the matter of allocation of power. But, if the distribution systems were poor and outdated, and if the people handling distribution were least concerned in ensuring reliability of supply through proper upkeep and maintenance of the system, there was little scope to improve. Therefore, the job of monitoring by the Task Force began and ended with the attempt at ensuring adequate supply of power from various sources, getting required amount of coal for power plants which supplied power to Delhi, and for doing so, arranging railway transportation, so that power plants were not starved of the fuel. When it came to addressing the issues of distribution, the intervention by the Task Force, as a matter of fact, made little difference. We found that the failure rate of distribution transformers was more than 20% annually. For well run distribution utilities like BSES it would be less than 1%. On the top of it, time taken to repair or replace these failed distribution transformers used to be enormously long. Bursting of cables used to be a regular phenomenon. Substations, Distribution Transformers, Cables, all needed to be upgraded because they were excessively overloaded. Thus, failure of distribution transformers and bursting of cables, together with not so responsive approach of employees and engineers to set them right, scripted the entire story of Delhi power supply.

It would be appropriate to also highlight the commercial and financial status of DESU. It is not that only technically the organisation suffered from almost all types of inadequacies, resulting in avoidable hardships caused by supply disruptions to consumers, but also financially the health of the organisation was very poor and ever deteriorating. Net loss of Delhi Vidyut Board (DESU was subsequently converted into Delhi Vidyut Board) was Rs. 200 Crores in the year 1990-91, it increased to Rs. 500 Crores by 1995-96 and further to over Rs. 1200 Crores in the year 2001-02. If the initiative of privatising Delhi distribution had not been taken, we could be right in assuming that the annual loss, which more than doubled in a period of five years to more than Rs. 1,200 Crores, would have again more than doubled in the subsequent period of five years to over Rs. 2,500 Crores in the year 2006-07. It needs to be recognised that these losses meant financial burden to the Government of Delhi which kept subsidising the efficiencies of the Delhi Vidyut Board.

The financial condition had worsened so much that Delhi Vidyut Board owed substantial amounts of money to almost every organisation which supplied goods and services to DVB. It was not able to pay to Badarpur Thermal Power Station, nor fully to NTPC power plants, nor to coal companies which supplied them coal and nor to railways which would transport coal to their power plants. Thus, conditions were chaotic technically, commercially and financially. The aggregate technical and commercial loss in electricity distribution, which captures the difference between power which is procured and power for which payments are realised from customers, was 22% in 1991, rose to 48% in 1995-96 and further to 53% in 2001-02. This was the average for the entire distribution area of Delhi. In fact, the distribution loss in Eastern Delhi was as high as 63% (corresponding figure for BSES Mumbai was about 11%). Thus, the situation had reached a stage when everyone was not only feeling uneasy but also a radical reform, involving structural changes, was the desire of all concerned. What was missing, however, was the political will and determination to face all types of odds and drive the change process.

The issue started getting right focus and priority in 1999 when the new Government took over in Delhi with the Chief Minister Mrs. Sheila Dixit in the driving seat for a long drawn change and reform initiative. Apart from a few other organisational changes that were initiated, she took a bold decision that nothing short of privatising Distribution might be able to make any significant dent and bring about a turn around. By the year 2000, reasonable amount of feedback on Orissa electricity distribution privatisation was available. I was personally associated, with Orissa initiative, right from the beginning, as Chief of BSES, which took over two companies. Orissa exercise had thrown up a number of lessons. With reference to the process of privatisation, which was started in Delhi, we made substantial contribution in structure and architecture of this initiative to ensure that this exercise succeeded.

It took more than a year and finally Delhi Distribution, restructured into three Distribution companies, was privatised in July, 2002. Two companies were taken over by BSES and the third by Tata Power. It is about eight years since privatisation. Initial two to three years were very difficult; and we did expect that visible and significant positive impact of privatisation would be available in not less than five years or so. In the past, I have written couple of articles - one each on Tata Power controlled company and on BSES controlled companies. This paper presents a brief picture after eight years of privatisation and it highlights how this initiative has been so successful, satisfying and rewarding.

Specific Measures

Before we analyse the outcome, it will be relevant to briefly take stock of a few important steps which were taken by the Government, Regulatory Commission and the Distribution Companies.

  • Delhi Vidyut Board was restructured into five legal entities - Generation Company, Transmission Company and three Distribution Companies.

  • A very imaginative and facilitative approach followed by the Delhi Government was to ensure that all reorganised companies but with a clean slate, with all the unserviced liabilities taken over by a Government holding company.

  • The five year projection of input price of power, and transition period support by Government were all made part of the direction issued by the Government, under Delhi Electricity Reform Act, so as to address the concern relating to regulatory uncertainty.

  • Regulatory Commission has been undertaking the exercise relating to tariff and issues concerning power supply. This has stabilised the process and the ground rules.

  • Discoms have started functioning on professional lines. Some of the important initiatives taken by them include :

    1. Augmentation of existing transformers to improve efficiency and reliability of supply.

    2. Load balancing of transformers and segregation of feeders aimed at higher levels of reliability.

    3. Replacement of mechanical meters by electronic meters .

    4. Improvements in Billing systems through appropriate I.T. inputs.

    5. Energy conservation measures including energy audits, Distribution, Transformer, metering etc.

    6. SCADA and GIS for improved and efficient service to customers.

    7. Setting up modern customer care centres.

    8. On line Bill access.

    9. Multiple options for payment of Bills - Dedicated counters, cheque by post, mobile cash vans, pay by phone, metro-drop box, net banking payment, Skypak drop box, Auto debit payment.

    10. I.T. applications for improved service include SCADA, GIS, EBS, AMR, Call Centre, OMS etc.

    11. Under electricity the institutions of Ombadsman, and Consumer Courts have led to improved resolution of bill related disputes.

    12. New connection camps and I.T. based tracking of requests for new connections have led to reduction in waiting time.

    13. Several electricity theft control measures.

    14. During Delhi Vidyut Board days the capital expenditure on Distribution system augmentation used to be about Rs. 400-450 Crores per year. During 2009-10 the corresponding figure is of the order of Rs. 1,300 Crores. Cumulative figure of capital expenditure to augment and modernise the system since privatisation till January 2010 is about Rs. 5,800 Crores.

Outcome

These efforts, post privatisation, have led to several positive outcomes :

  1. Financial health of Distribution is fully sustainable now.

  2. Savings to the Government, as projected by the Delhi Government have been of the order of about Rs. 20,000 Crores.

    (Break up:- AT&C loss reduction - Rs. 11,700 Crores, Capital expenditure till 2008-09 - Rs. 5890 Crores, Loan pay back - Rs. 1,416 Crores and ( E Tax payment Rs. 350 Crores).

  3. AT&C loss which was of the order of over 60% in East Delhi and 50% in North Delhi and Central Delhi has reduced in all cases. Now the AT&C loss is in the range of 15 to 20%.

  4. Transmission capacity has grown by about 60%, transformation capacity by about 90%.

  5. Distribution Transformer failure rate which used to be over 15% annually has reduced to less than 1%.

  6. There is no default in payment to generation Utilities which supply power. It has been 100% since 2003-04

  7. Load shedding as percentage of total supply, which was as high as 5% in 2000-01, has reduced to about 0.6% in 2008-09.

Thus, there is overall improvement, and the process continues. This has led to much more reliable power supply. On balance, the initiative of the Government has not only succeeded but also it has been a highly rewarding exercise.