India has emerged as the third-largest electricity generator globally, but power distribution companies (discoms) grapple with a myriad of challenges.
- Operational inefficiencies plague discoms, with technical and commercial losses (AT&C) standing at a staggering 21.4%.
- These losses result primarily from power theft, inadequate payment collection procedures, and insufficient tariff adjustments.
- Example: High AT&C losses have been observed in states like Uttar Pradesh and Bihar.
Increasing Open Access Transactions:
- Large commercial consumers are increasingly opting for private power purchase through open access, bypassing discoms.
- This trend erodes discoms’ revenue base.
- Example: Major industries in Gujarat have switched to open access, leading to substantial revenue loss for the state discom.
Political Will and Transparency:
- There is a lack of political will and transparency in phasing out energy subsidies for consumers.
- Subsidies create financial stress for discoms.
- Example: Political considerations have often hindered tariff hikes in various states.
Lockdown-Induced Demand Decline:
- The COVID-19 lockdown resulted in a decline in demand, affecting discoms’ revenues.
- Domestic users, paying lower tariffs, could not compensate for the commercial slowdown.
- Example: Discoms in Maharashtra faced revenue shortfalls during the lockdown.
Increased Power Purchase Cost:
- Power purchase costs have risen, with input costs for coal and freight going up.
- This adds to the financial burden of discoms.
- Example: Rising coal prices have impacted discoms heavily in coal-dependent states like Chhattisgarh.
- Discoms owe significant outstanding dues to power producers, hindering the power sector’s financial stability.
- Example: Outstanding dues on the PRAAPTI portal indicate a growing debt crisis.
- Delayed payments to renewable energy developers have made investments in the sector challenging.
- This hinders India’s renewable energy goals.
- Example: Payment delays in Andhra Pradesh created uncertainty for solar energy investors.
Privatisation as a Solution:
- Privatisation can address these issues based on past experiences.
- Example: Delhi’s AT&C losses dropped significantly after privatisation in 2002.
- Privatisation offers operational autonomy, reducing political interference.
- Example: Improved network efficiency was seen in Mumbai after privatisation.
- It can enhance operational efficiencies, reducing issues like payment delays and power cuts.
- Example: Discoms in Odisha improved services and reduced losses after partnering with private companies.
- Privatisation can stimulate private sector investment and innovation.
- Example: Successful public-private partnership (PPP) models in states like Gujarat can attract more investments.
While privatisation holds promise, complementary measures are essential.
These include empowering regulatory bodies, promoting cooperative federalism between the center and states, and redefining the revenue model to encourage renewable energy and open access.
A holistic approach will be key to revitalizing India’s power distribution sector and ensuring sustainable growth.