Forum of Regulators (FOR), a representative body of Central and state electricity regulatory commissions, proposes to rope in a consultant for carrying out a comprehensive study on performance of distribution utilities. This is necessitated as FOR notes that operational and financial performance of distribution companies (discoms) have been a major concern. Further, poor billing & collection, high level of distribution losses, increasing cash losses, poor financial management are reported to be plaguing the performance of the discoms.
FOR has invited bids up to September 1. FOR expects the consultant to cover all distribution utilities in the study. The performance of the distribution utilities will be for the period from FY 2009-10 to FY 2013-14. According to FOR, restoration of health of the distribution sector remains critical to success of reforms in the power sector.
Former union power secretary R V Shahi told Business Standard: ” It is a good initiative by FOR to find out the exact problems in different states and work out package of reform initiatives needed. One size will not fit all therefore state specific action plans are needed. Distribution reform has gone on back burner in last four years. There are eight states in the country which account for 95% of the total annual loss which has reached staggering figure of Rs 80,000 crore. It is most important that distribution reform is brought back on rail which would mean drastic reduction in aggregate technical & commercial (AT&C) loss, cost reflective tariff and improvement in consumer services including reliable power supply.”
Shahi said there is a need for an institutional change including privatisation and franchisee option wherever state owned discoms have been totally unable to control losses and improve efficiency.
FOR’s move comes close on the heels of World Bank report on the present state of India’s power distribution sector. The report titled ”More Power to India : The Challenge of Distribution” released in June said two decades after the initiation of power sector reforms, an inefficient, loss-making distribution segment and inadequate and unreliable supply have become major constraints to India’s growth.”The regulatory environment has not sufficiently pushed utilities to improve performance. A lack of accountability, limited autonomy, and constrained technical capacity have restricted the ability of state electricity regulatory commissions to create an independent, trans- parent, and unbiased governance framework for the sector that balances consumer and investor or utility interests,” noted World Bank in its report.
Moreover, ICRA in its analysis released in July observed that overall subsidy dependence for FY 2014-15 for distribution utilities in the 16 states (based on the allowed subsidy levels in tariff orders) has also shown an increase by 17% over the previous FY, mainly on account of upward pressure on cost of power supply & continued subsidised nature of tariffs for agriculture consumers. On all India basis, subsidy dependence for the state owned distribution utilities for FY 2014-15 is estimated in the range of Rs 7,20,000 croree, which is estimated to have increased at CAGR rate of 16% since FY 2010.