The high-level advisory panel headed by Suresh Prabhu has correctly reiterated the need for reform in the transmission and distribution architecture of the power sector, which was designed two decades ago, before he was power minister. But we still need to address why the earlier reforms failed and how to remedy that. As far as transmission and distribution are concerned, India has the largest capacity in high-voltage DC lines in the world, as well as high capacity in conventional lines. Though there are some criticisms of the great technical achievements in augmenting grid capabilities and applying best-practice smart techniques, the key question is whether such practices can be replicated on a large scale.
With regards to investment to augment transmission capacity, five years ago, the Planning Commission said: “Although the power transmission segment has been opened to private investment in 1998, there has been only limited success in attracting private investment. The only public-private partnership project — the Tala transmission system — has been operational since May 2007.” In 1998, when I was power minister, I got the contentious transmission bill unanimously approved by a parliamentary committee under Jagmohan. That same year, a bill on the central regulatory authority was also introduced in the Lok Sabha. This legislation clearly laid down the structure of smart grids and alternative distribution channels. The Prabhu committee correctly says that this must be done, a decade and a half later. The question is how.
In fact, Tala was not the first project to be approved and implemented. But the memory of the earlier investment, based on an abandoned reform, seems to have faded. In 1997, FDI approvals reached Rs 25 billion, from less than a tenth of that amount earlier, and actual inflows were around
Rs 10 billion, up from nil earlier. In “Thirteen Years of Power Sector Reform in India: Are we Still Groping in the Dark?”, published by the University of Pennsylvania, journalist Kandula Subramaniam, a historian of India’s power sector, writes: “The framework of this draft legislation [referring to the transmission bill, which was approved by the parliamentary committee] was used to approve the first major private sector transmission project in Mangalore in 1997.” Subramaniam notes that “the National Grid of the UK, which was to execute the Mangalore transmission project, is the only foreign utility company in India maintaining operations to date”, and that the legislation was “cleared only in 1998 and to date, there have been no private investments in the transmission sector”. Between 1999 and 2005, FDI dried up. By 2001, it was already close to zero.
To the best of my knowledge, a study conducted for the Gujarat Electricity Board by my institute in the 1990s was one of the first to propose the unbundling of services such as metering, billing and revenue collection. Studying the Kheralu line, it was noted that the present system at the 11KVA level has to be supplemented, not replaced, with an efficient system that could deliver power continuously for a price. This became the reform mantra.
Some of the major cities where distribution has been privatised are Kolkata, Mumbai, Delhi, Greater Noida, Ahmedabad and Surat. There are more than 20 such cases. Transmission and distribution losses in the cities managed by private companies are noticeably lower than those managed by public utilities. By the last decade, the reported distribution loss levels in these cities were 14.3 per cent for Calcutta Electric Supply Corporation, 11 per cent for Ahmedabad Electricity Company and 18.5 per cent for North Delhi Power Limited. More recent experience of the results of the franchising process in difficult areas with large-scale power theft like Bhiwandi is encouraging. Smart techniques and real-time communication between customer and supplier are in use. Uttar Pradesh decided to hand over distribution in Agra and Kanpur to a private company on a franchise basis. The Ahmedabad-based company, Torrent, was awarded an input-based franchisee management contract of the kind implemented in Delhi. The breakpoint between describing these as best practices and a new trend was the Bhiwandi and Agra experience.
Some of the best practices adopted by various utilities in the distribution sector include IT-based applications designed to provide comprehensive and centralised records of billing and revenue recovery from various consumer segments and rural consumers being provided with quality supply and services through rural distribution franchisees operating on behalf of competing distribution companies. There are many interesting applications underway, despite the slow process of reform. Now, there is need for a sustained push at the political level to accelerate the reforms process.
The writer, chancellor, Central University of Gujarat, is a former Union minister of state (independent charge) for power (1996-98)