As we all know, power sector
reforms were initiated in early 90's from the generation end of the industry.
Several policy initiatives were put in place, a number of schemes were
incentivised, Government supports by way of even guarantees for payments to
service the investments were provided. All these were aimed at attracting
private sector investments. Yet, during the entire period of 90's and even
covering the early years of 21st Century, as against interests shown
for developing more than 60,000 MW of capacity, not more than 6,000 MW (hardly
10%) could materialize from the private sector route. After ten years of trials
and tribulations, rather belatedly, it was realized that power sector reforms
should have been started from the distribution end of the industry rather than
from the generation front. It is the distribution segment which has to support,
through realization of revenues, the capital investments made in the entire
supply chain - investment in Fuel Sector, Power Generation Projects,
Transmission Systems, Distribution Infrastructure and in arranging sale of power.
Burdens of all these investments have to be finally mitigated by the
distribution business. Unfortunately, almost in the entire country, Electricity
Distribution sector, which was controlled to the extent of more than 95% by the
State owned Electricity Boards, over a period of several decades but most
prominently during 80's and 90's, demonstrated even deteriorating technical and
commercial performance. In fact, most of the professionals and others engaged
in the sector as also those interested in the sector started believing towards
the end of 90's that the distribution segment of the Indian electricity sector
has emerged as the bottomless pit in which any amount of electricity can be
poured in without really being assured that the power will be appropriately
accounted for, billed and paid for by the customers. Discoveries of weaknesses
of all types in every aspect of distribution business led to the realization
that unless the orientation of power sector reform is realigned to distribution,
none of other initiatives would work and bring about any visible change and
Attention of Government and
other policy planners got focused to reforming distribution - technically,
commercially and financially. It was recognized that major structural changes
would be necessary. A number of States had already started introducing
legislative reforms envisaging reorganization of Electricity Boards and
subjecting the commercial functioning of the electricity industry through
regulatory interventions. Electricity Act 2003 further reinforced the need and
rationale of such structural reorganization. Most of the large States responded
to the need of reorganizing their State Electricity Boards. Obviously,
reorganization as such, though a necessary condition, is not sufficient to
derive the full benefit of reform and restructuring. Many States reorganized
but fell far short of properly manning the top functionaries' posts and
empowering the respective Boards of these reorganized companies. Many of the
States took lot of time to entrust the management of these companies to
competent professionals, many of them are still in the process while a few of
them have not even reorganized. Those States which restructured their Boards
and allowed them to function with required operational autonomy and flexibility
and provided, in these companies, suitable Board and top management level
functionaries, have derive good benefits. They are worth emulating. Sometime
back, I examined in detail, in a couple of articles, the outcomes of
reorganization of Delhi Electricity Board and Gujarat Electricity Board, and had
kept pending further analysis of a few other States which have demonstrated
significantly better performance as compared to many other States. In this
paper I would like to cover the States of Andhra Pradesh, Maharashtra and West
Bengal and simultaneously would also attempt to update the outcomes in respect
of Delhi and Gujarat, which were covered in an earlier article. Orissa had
organized much earlier and several papers have been written about this.
Before I present the
performance parameters and a comparative assessment of the Electricity Sector of
these six States it may be important to describe in brief some of the common
salient features of the initiatives taken by all these States. These would be
of direct relevance to other States for adopting them or for their adaptation
suiting to the specific needs and peculiarities of different States:
belief that reorganization of integrated State Electricity Boards into
Generation, Transmission and Distribution Utilities will lead to a more
pinpointed and focused accountability of the respective entities and that the
large unwieldy integrated structure has the deficiency of diffused and confused
responsibility, has proved to be the guiding principle of reorganization.
Growing realization and acceptance of this principle is leading to committed
actions by the Governments.
Pradesh, after Orissa, was one of the first few States which reorganized,
Maharashtra and West Bengal have had the experience now only of last two years
or so on the reorganized pattern. Gujarat, though came later than Andhra
Pradesh, does have an experience of working with reorganized structure for the
last four years.
In all these
exercises it is important to convey that thrust of reform of distribution cannot
be tariff rationalization alone - though it is perhaps one of the most important
requirements - equally important would be issues like quality of power supply,
care for customer conveniences, quick response for providing new connections to
the likely customers, arranging, in advance, adequate power so that supply
disruptions are minimized, and constantly updating, augmenting and modernizing
the distribution infrastructure to cope with increasing pattern of demands.
States which have given due importance to all these aspects in a balanced manner
have not only succeeded in winning the loyalty and appreciation of their
customers but have also benefited immensely on their commercial performance.
of commercial performance we need to recall that during the entire 90's, without
exception, by and large all Electricity Boards kept accumulating and increasing
their losses, so much so that the total annual loss of all Electricity Boards
put together which was about Rs. 3,000 crores during 1990-91 rose to a
staggering figure, within a period of ten years, to about Rs. 30,000 crores by
2000-01. It appeared that turn around of any Electricity Board was not only
difficult and challenging but virtually impossible. Incidentally, this was the
sole reason for private sector investors being totally indifferent,
notwithstanding best of the power policies and most attractive returns provided
regulatory decisions and commitment for implementation by the concerned
stakeholders, be they the power companies, the State Governments or other
agencies, is the most important requirement of the reform process. If we look
at the States under discussion, depending on the extent of implementation in
this regard they have been able to derive the benefits.
As regards the
physical and financial performance, right in the beginning of the 10th
Plan when Accelerated Power Development and Reform Programme (APDRP) was
introduced by the Ministry of Power, Government of India, to improve
distribution systems in towns and cities, the whole concept of determining
distribution loss in the system was redefined. A new formulation with the
nomenclature "Aggregate Technical and Commercial (AT&C) loss" was brought in.
This concept not only covers the loss in the system but also captures the bill
collection inefficiency. The financial performance of the distribution business
is directly dependant upon this factor. The experiences in different towns and
cities indicated that losses were in the range of 20% (outstanding performers)
to over 80% (poor performers). The choice of towns and cities to be covered
under APDRP was primarily based on the ground reality that much of the
electricity transacted by the distribution companies is concentrated in these
towns, cities and industrial estates, and that if we succeeded in creating
breakthrough in these areas of distribution, commercial revival of the utilities
would be easier and faster. This is the approach which guided the formulation
2003 provided for specific stringent measures to control theft of electricity.
Even prior to the Act, States like Andhra Pradesh and West Bengal initiated
their own steps for control of theft of electricity. In fact, West Bengal
issued an Ordinance, which subsequently was converted into legislation,
providing for very harsh punishments for those consumers and also for the
conniving employees, indulging in theft. It may be relevant to mention that
even though strong measures were provided in the Electricity Act, towards the
end of year 2006 it became clear that the Act needed to provide for even more
extensive and stringent punishments so that this menace of electricity sector
was effectively controlled and eliminated. Accordingly, a comprehensive set of
amendments to the Act were formulated, which were later passed by the
Parliament. All these States which have been able to achieve remarkable results
have, to a great extent, taken important and effective measures including
setting up of special police stations and Special Courts to handle the cases of
technical and commercial losses and rationalizing the tariff structure led to
better consumer awareness which in turn created expectations among the consumers
for uninterrupted power supply. Obviously this would be possible only if the
State Utilities and also the Private Utilities arrange their generation business
properly and take appropriate advanced action in time so that availability of
power leading to reliable power supply is ensured. Reorganisation therefore has
not only helped in taking care of the distribution business by the concerned
distribution companies in a more responsive and responsible manner, but has also
led to greater sense of responsibility among the reorganized generation
Based on the above general
approach on various issues there would definitely be difference in priorities
and thrusts in varying degrees in different States. It may be relevant to
analyse the initiatives and outcomes achieved in last few years which led to the
turn around in these States. While Orissa was the first State to have
restructured its power industry way back in 1995-96, out of others we will
analyse in brief Delhi, Andhra Pradesh, Gujarat, Maharashtra and West Bengal.
All of these have achieved turn around.
since the State reorganized the power industry, never had to subsidise the
sector. This is one State which has surplus power. It is able to trade that
power with other State Utilities and further strengthened its finances.
Distribution companies, which had several problems in the initial stage, have
come a long way. The only minus point in case of Orissa is highly deficient
approach on the rural electrification. Since the reform and restructuring
initiative of Orissa has been extensively discussed and analysed in separate
papers, this not being detailed here.
distribution companies in Delhi have brought down substantially, beyond the
targeted levels, the Aggregate Technical and Commercial (AT&C) losses. In two
of the Weekly Articles, I have discussed the initiatives and outcomes in
relation to the North Delhi Power Ltd. (Tata Group) and about the two other
distribution companies controlled by Reliance Energy. There are a number of
areas where further improvements are necessary. It is also the common
assessment that perhaps the improvements could have been faster. However, we
must evaluate the electricity reform initiative of the Government of Delhi
visualizing the situation in absence of such an action. We saw during the
period 1995 to 2000 the losses of Delhi Vidyut Board increasing from less than
Rs. 400 crores a year to more than Rs. 1200 crores a year. We also had the
experience of the poor reliability and quality of power supply then. It is not
the case that there are no issues now on reliability of supply, but definitely
demonstrable changes over last five years have been experienced by most of the
customers due to improved power supply and better response to consumer
complaints. Had the restructuring and reform initiative not taken place and the
trend of ever increasing losses continued, the annual loss figure by now would
have crossed Rs. 2,500 crores and accordingly the financial burden on the
Government Budget would have gone on increasing.
about outstanding achievements in towns and cities of Andhra Pradesh. This
State was one of the first few States which took up the revamp of City
Distribution Systems right from the year 2002-03. They could achieve loss
reduction to the level of less than 15% in most of the towns, in a period of
three to four years, and in a large number of towns, in fact, the AT&C loss
achieved was less than 10%. In the year 2000-01 the AT&C loss for Andhra as a
whole was of the order of about 33% which came down to about 17% during 2006-07
and further to about 15.4% in the year 2007-08. No other State, for the State
as a whole, has been able to achieve this type of a result in distribution loss
In the year 2000-01 the
deficit in the power sector was of the order of Rs. 1,310 crores. From the year
2002-03 it started reducing substantially and reached a level of a little more
than Rs. 100 crores in the year 2002-03. In the year 2004-05, the sector turned
around with a surplus of Rs. 57 crores which increased to Rs. 168 crores in the
As a result of physical
performance as above in terms of distribution loss reduction and improved
collection efficiency, the dependence of the power sector on State Government
continuously reduced. In the year 2000-01, the support required from the
Government was of the order of Rs. 2,936 crores which reduced to Rs. 1,047
crores (i.e. annual reduction of the order of about Rs. 1900 crores) in the year
2007-08. This includes the subsidy given by the State on account of free power
which is of the order of about Rs. 500 crores.
The important steps taken by
the power sector and the Government of Andhra Pradesh, in last six to seven
years, include the following:
addition of 5,042 MW.
143 nos. of EHT
sub-stations, 1430 nos. 33 KV sub-stations and over 4 lakh Distribution
Transformers were installed.
Over 11,000 Ckt
kilometers of EHT lines were added.
About 89 lakh
new connections were added.
Citizens' Charter 2002.
Centres, 2712 Collection Centres (compared to 4390 in 2002), 1120 - Ekiosks in
rural and 250 in urban area.
Standard Performance Norms.
Analysis Tool (CAT) to track Bill irregularities.
Information Management System (TIMS) to better maintain Distribution
measures - Arrests, Special Police Stations, Special Courts, and Conviction etc.
The story of reform in the
power sector of Andhra Pradesh would really have been highly satisfying and
worth emulating but for the decision of the Government of Andhra Pradesh to
provide free power to agriculture. This makes the story not only disturbing but
also the State cannot claim to be ranked at the top in the power sector reform.
The Aggregate Technical and
Commercial (AT&C) loss which was almost 35% in 2005-06 has decreased to about
24% (i.e. about reduction of absolute 10% points) in 2007-08.
The average monthly revenue
collection has increased from Rs. 1100 crores (2005-06) to Rs. 1600 crores
The distribution transformer
failure rate has decreased from about 20% to about 13%. Though this is still
very high, reduction in failure rate is remarkable.
The Generation Company has
also started focusing on new capacity additions and has initiated expansion
programmes of the existing power plants and has also taken up new power
The Maharashtra State
Electricity Distribution Company which had a deficit of about Rs. 134 crores
even during 2006-07, has turned around to a surplus of Rs. 82 crores in the year
Some of the important steps
that MSEDC has taken are as follows:
police stations with 15 police outposts to handle electricity theft cases.
led to about 60,000 in 2006-07 and about 92,000 of theft cases which were
detected; about 1800 accused were arrested.
orders were passed in a large number of cases.
of Electricity Bills; Tampered Meters photographed and action against theft
Accounting at Division/Feeder/DTC level has helped in identifying specific
problem areas for corrective action.
regularize unauthorized drawal of power - more than 1.27 lakh cases connected.
system for every level of officer identifies targets for AT&C loss reduction and
actual achievement. This has brought about consciousness, at all levels, about
employees involved in electricity theft cases have been departmentally punished
including 25 suspensions in 2007-08 alone.
important and historic initiative in Maharashtra has been the introduction of
"Distribution Franchisee" in Bhiwandi in January 2007. Bhiwandi (about 500 MW
Load) had been one of the most challenging areas with very high AT&C loss (of
the order of more than 60%). In last over one year, the positive result is
already visible. AT&C loss has come down to about 25%.
Bhiwandi Franchisee initiative, Maharashtra is considering franchising six more
towns (Nagpur, Aurangabad, Kalwa, Ulhasnagar, Jalgaon, and Dhule) where AT&C
losses are comparatively very high.
MSEDC is targeting the
distribution loss reduction to 15% by the year 2011-12, collection efficiency to
be improved to 100%, all old meters beyond ten years of service are being
replaced, Geographical Information System including Geographical Mapping are
being introduced in major cities and they are targeting a No Load Shedding
situation by 2011-12.
While reorganization of
Maharashtra Electricity Board has proved useful, it would be better if they have
more than one Distribution Company. Competition among distribution companies on
performance will improve quality of service as also efficiency of operations.
The Aggregate Technical and
Commercial loss which was 36.3% in the year 2002-03 reduced to 26.5% in the year
2005-06, has further reduced to 23.68% in the year 2006-07.
The loss of Rs. 1,932 crores
in the year 2003-04 reduced to Rs. 927 crores in the year 2004-05. Its turn
around to a profit of Rs. 202 crores in 2005-06 has somewhat declined but even
in the year 2007-08 the profit is Rs. 168 crores.
provides a very good reform story. As already mentioned earlier, the State took
early steps, even before reorganization, on theft control by notifying a very
powerful Ordinance on the subject.
So far as the reorganization
of the State electricity sector is concerned, the Government had already set up
a power generating company earlier called West Bengal Power Development
Corporation. During the entire period of 10th Plan this company
focused on capacity addition with remarkably good results. The State does not
have to face power shortage situation. In fact, quite often it has surplus
power to sell to other States.
Reorganisation of the State
Electricity Board into transmission and distribution was decided in 2006-07,
with separate transmission company and one distribution company.
During the period 2001-02 to
2007-08 the revenue has increased from Rs. 2,438 crores to Rs. 6,030 crores.
The operating surplus (EBDIT)
which was (-) Rs. 232 crores in the year 2002-03 has continuously improved and
it was (+) Rs. 905 crores in the year 2006-07.
The aggregate technical and
commercial loss which was as high as 43.43% in the year 2003-04 has come down to
28.53% in the year 2007-08.
Some of the specific steps
that have been taken by the state power sector and the Government include the
High Voltage Distribution System (HVDS) in agricultural sector (About 6,000
number of connections).
Bifurcation for agriculture and domestic loads.
Conventional Meters by Static Meters.
Metering upto 6 KV, alongwith energy audit.
Transformer metering completed in six circles and 10 Towns. Further work in
initiatives include - Revenue Management System (RMS), Energy Management System
(EMS), Corporate Administration and Monitoring System (CAMS).
Reading; Spot Billing System.
On line Cash
Collection System, Pre paid Metering.
Warehouse and Call Centres.
Information System (GIS) etc.
I recall, in the year
2003-04, from the Ministry of Power we started a Scheme of Rating of Electricity
Sector of all States by CRISIL and ICRA. This initiative led to discovery of
strengths and weaknesses and an anxiety to change and improve. We also
introduced an Annual Event to discuss Best Practices in every aspect of
Distribution together with Exhibition. These led to not only dissemination of
Performance Benchmarks but a determination to reform, to act and to improve.
The cases of six States have been briefly discussed. There are many others
where changes have started happening. It has now been widely recognized and
accepted that "Distribution" holds the key. It would make or mar the sector.
Therefore, each State is trying its best. And that is the silverlining.