RK Singh: ‘Opening up competition in discom key to efficiency, nearly all states on board’

Nearly all states are on board with the federal government’s intention to open up the ability distribution sector to competitors by the Electricity Amendment Bill, a transfer that can be sure that customers get a alternative and repair suppliers should compete with one another, Union Power Minister R Ok Singh informed The Indian Express.
Singh added the opening up of competitors in energy distribution was one of the best resolution to the effectivity points confronted by the sector, which is clearly the weakest hyperlink in India’s energy sector and that’s elementary to the monetary viability of the upstream technology and distribution sectors. Issues resembling poor billing, assortment effectivity and excessive receivables from state governments have led to state-owned discoms (distribution corporations) constantly scuffling with excessive losses, elevating query marks over the monetary viability of investments in the whole sector.
“I’ve had consultations with the states, all the principal secretaries, division wise … I think only one state probably said that this will be difficult, everybody else has discussed the mechanics of it, not the principle of it,” Singh mentioned on the plan to introduce competitors for discoms, which at present have monopoly on distribution of their service areas, be it state-owned discoms or personal service suppliers.
West Bengal Chief Minister Mamata Banerjee had in August written to the Prime Minister, citing opposition to the transfer, calling the Bill “anti-people”. Banerjee mentioned the Bill would result in personal sector gamers “cherry picking” areas with excessive paying industrial and industrial customers, leaving state discoms “sick” and having to supply providers to solely rural and agricultural customers whose consumption is subsidised.
Singh mentioned the allegation of cherry selecting by service suppliers is unfounded. He mentioned new gamers would prioritise entry in areas the place there’s broad room for effectivity and bringing down decrease costs, noting that the cross-subsidisation of rural and agricultural customers by larger tariffs charged to industrial and industrial customers would proceed.
“So, what happens is that if in a particular area, there are more payers of cross-subsidy than the consumers of the cross-subsidy, there will be a cross-subsidy surplus that will be deposited with that organisation (subsidy holder appointed by states) and that cross-subsidy goes to finance areas where the demand for the cross-subsidy is more than the cross-subsidy collection,” he mentioned. The precept is one thing that has been tried out within the telecom sector by means of the USO Fund, the place sources for assembly the service obligation in distant, unviable areas have been to be generated by a common entry levy at a stipulated proportion of the income earned by the telecom licensees, with service suppliers working in distant, unviable areas to be duly reimbursed from this fund.
Multiple Central authorities schemes to cut back discom losses and enhance operational effectivity haven’t been in a position to make sure a sustained turnaround of discoms. High excellent authorities division dues to discoms valued at Rs 97,088 crore in June and subsidies payable by state governments to discoms at Rs 60,743 crore are additionally placing extreme stress on discom funds. Low billing effectivity is a key concern within the distribution sector, with discoms registering an effectivity of solely 85.4 per cent in FY20.
Financial instability of discoms has additionally led to a delay in funds to energy technology corporations, with main corporations resembling state-owned NTPC Ltd, threatening to manage energy provide to main discoms over cost delays. In June, discoms had payables of about
Rs 1.76 lakh crore to state and Central energy technology corporations and transmission corporations. “So, one thing is clear that if power bills are not paid for 45 days, which is the payment time, then regulation will happen. This is going to happen. I have told every genco (generation company) that no payment means no electricity. Otherwise, discipline will not come,” Singh mentioned.

The authorities has lately introduced a brand new Rs 3.03-lakh-crore discom reform scheme to carry down combination technical and industrial losses to 12 per cent, down from a nationwide common of about 22 per cent at present, and to get rid of the hole between the price of provide and common income realised by discoms. The new scheme is linked to improved operational efficiency by discoms with the discharge of funds by the Centre being contingent on achievement of discount in losses and set up of recent infrastructure, together with sensible meters.
Singh additionally famous that privatisation of energy distribution as a substitute for delicensing was a “sub-optimal” resolution to enhance discom effectivity and repair for customers. “… privatisation is that you are replacing a government monopoly with a private monopoly. So it’s a sub-optimal solution. Some would say that a private monopoly is worse than a government monopoly,” he mentioned, including the modification would simply open the door for competitors and that current discoms would proceed as they’re.
Privatisation of state discoms in sure areas together with Delhi, Ahmedabad, Kolkata and Mumbai has led to extend in operational effectivity and enhancements in monetary stability, although the idea of ushering in competitors inside a service space remains to be to be achieved.