Competition among discoms may trip on power line monopoly

Competition among discoms may trip on power line monopoly

Except for a few big cities, distribution network is controlled by state utilities.

A radical reform move in the country’s power sector readied by the NDA government, which envisages the advent of multiple suppliers in the loss-laden distribution side, is facing flak for a fundamental flaw — that even after competition at the retail level is introduced, consumers will still have to deal with the same monopoly wire service provider for getting a new connection, breakdown or faults, billing or metering problems or a change of load.

The scheme for separation of ‘carriage and content’, likely to figure among the Budget 2015-16 announcements, aims at the elimination of the territorial distinction that exists among electricity distribution companies in each state and envisages multiple supply licensees on the consumer-end being able to compete with each other, with the retail consumer having the option to migrate from one supplier to another.

While the proposal is being touted as a game changer that has the potential of ushering in competition in the electricity sector on the lines of what was done in telecom, concerns stem from the fact that even after competition in the retail sale of electricity is ushered in, the consumer will remain connected to the monopoly network service provider or wire company.

In India, this is mostly a government-owned monopoly. While there are exceptions in a few big cities such as Delhi, Mumbai and Ahmedabad, where upfront privatisation of the distribution network has been done, the performance of the state-owned discoms providing network service across the country, by and large, continues to be shabby.


The focus of the government’s initiative on introducing completion in the retail side is seen to have diverted the focus away from the poor performance of distribution network service provider, which is the bane of the consumers.

As a result, even after the proposed amendments in the Electricity Act 2003, envisaging the separation of carriage and content, are introduced, the difference at the consumer level is unlikely to be as dramatic as in the telecom sector.


States have already raised their opposition to some of the provisions of the Bill, saying the matter has not been discussed with them despite electricity being a concurrent subject. The Bill is before the Parliamentary Standing Committee on Energy currently and the Centre hopes to introduce it in Parliament during the upcoming budget session. There are also question marks over the implementation of open access, a fundamental reform measure that entitles a consumer to migrate to a service provider of his choice upon payment of a cross-subsidy charge to his existing provider.

The fact that open access has been a failure so far is on account of high cross subsidy surcharge that makes it unviable for a consumer to migrate, something that has not been sufficiently addressed in the proposed amendments. Under the amendments, the government has decided to break up the monopoly of the distribution companies.

Within 12 months of the proposed amendment to the Electricity Act 2003 becoming a law, discoms will be broken into a wire company and an intermediate supply company. The distribution wire business would remain with the incumbent state-owned distribution company and the business of retail supply to consumers would be opened up to multiple players, mostly private.