R’n Looks at Pvt Cos to Light up Power Distribution

CALCULATED MOVE Moving to PPP model would help reduce annual revenue gap of . 15,000 cr; state eyeing investments of ` ` . 6,000 cr as it aims to add 30 lakh customers
Rajasthan is readying to invite private participation in power distribution from next year, eyeing investments of ` . 5,0006,000 crore as it aims to add 30 lakh customers in the next five years.The state plans to move to public-private partnership (PPP) from the current government ownership of distribution companies or discoms and reduce annual revenue gap of ` . 15,000 crore through various steps, including reduction in transmission and supply losses and increase in tariffs. “By the beginning of the next financial year we aim to bring out bidding documents for private participation. We won’t cover the entire state in one go but in phases, each of which will have a mix of high-loss urban and semi-urban areas,“ Rajasthan’s principal secretary for power Sanjay Malhotra told ET.

Prominent power companies, including Torrent Power, Adani, Tata, Reliance, Essar and Reliance seem to be interested, he added. Rajasthan’s discoms have accumulated losses of ` . 77,453 crore and a wide gap between revenue and costs persists despite four tariff hikes in as many years. According to official data, during 2013-14 discoms lost about . 1.60 on each unit of energy sold ` due to as much as 26.4% distribution losses.

Bharatpur, Kota, Ajmer and Bikaner could be the areas where private sector participation could be invited. According to Malhotra, Rajasthan plans to adopt a mix of the distribution franchisee and concessionaire model, in which the private partner is not merely a contractor.

“We are exploring possibility of a model which is more than a distribution franchisee where the private partner can go to the reg ulator directly for fixing prices and is able to buy power directly from generators to bring down costs. We’re not selling off government companies but having two separate entities,“ he added.

According to sector experts, a lot of caution has to be exercised in implementing PPP in Rajasthan’s discoms as their baggage of losses is way too heavy and private companies can only work towards the future. “PPP has worked well for a sector like roads. In generation, we have seen that interference by concession authority doesn’t bode well for the private company. Rajasthan will have to do this sensibly, with the government keeping to a minimum. Ongoing interference can make risk of failure high,“ said Anish De, partner (infrastructure and government services) at KPMG. Meanwhile, there are talks in the government to go for separation of carriage and content as part of amending the Electricity Act 2003.

Under this, one company owns the network while electricity supply will be done by different entities.

“We must remember if that happens (separation of carriage and content), the framework under which this PPP is happening would be disturbed in some manner and how it will then work is something tricky,“ De added. The state seeks to financially restructure the discoms by improving efficiency and viability of its business oper costs. We’re not selling off government companies but having two separate entities,“ he added.

According to sector experts, a lot of caution has to be exercised in implementing PPP in Rajasthan’s discoms as their baggage of losses is way too heavy and private companies can only work towards the future.

Source: Economic Times; 04 April 2015
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