Power Distribution Reforms in India – a Journey from Monopoly Towards Competition.
Power Distribution Reforms in India – A journey from Monopoly towards Competition.
Case Objective:
Power a basic human need is the critical infrastructure on which modern economic activity is fully dependent. Only 55% households in India have access to Electricity. Most of those who have access do not get uninterrupted reliable supply. In this era of globalization, it is essential that electricity of good qualities is provided at reasonable rates for economic activity so that competitiveness increases, which is essential for higher GDP growth per annum, employment generation and poverty alleviation.
Legacy scenario prior to enactment of Electricity Act 2003:
Electricity distribution in India had been primarily a Regulated Monopolistic Market where Power in individual state were being supplied by State Electricity Boards (SEB’s), Licensed to operate by the respective state governments. There were a few exceptions of private players in states like West Bengal, Gujarat and Maharashtra. Thus essentially consumers have no other alternatives, but the option of purchasing electrical power from SEB’s / Single Licensees.
Electricity Transmission and Distribution losses in India during were extremely high and varied between 30 to 45%. Theft of electricity, common in most parts of urban India, amounted to 1.5% of India's GDP.
The financial health of SEB’s had become a matter of grave concern. The gap between Average Revenue Realization and Average Cost of Supply had been constantly increasing.
The major factors responsible for financial sickness of SEB’s were:
• Skewed tariff structure leading to Unsustainable Cross Subsidies by State Government. • Huge T&D losses, largely due to outright theft and un-metered supply. It has been estimated that theft alone caused loss of about Rs.20, 000 crores annually. • Lack of Accounting and Accountability in power distribution. • Large man power – 27 to 30% Revenue was used for establishment
Case Objective:
Power a basic human need is the critical infrastructure on which modern economic activity is fully dependent. Only 55% households in India have access to Electricity. Most of those who have access do not get uninterrupted reliable supply. In this era of globalization, it is essential that electricity of good qualities is provided at reasonable rates for economic activity so that competitiveness increases, which is essential for higher GDP growth per annum, employment generation and poverty alleviation.
Legacy scenario prior to enactment of Electricity Act 2003:
Electricity distribution in India had been primarily a Regulated Monopolistic Market where Power in individual state were being supplied by State Electricity Boards (SEB’s), Licensed to operate by the respective state governments. There were a few exceptions of private players in states like West Bengal, Gujarat and Maharashtra. Thus essentially consumers have no other alternatives, but the option of purchasing electrical power from SEB’s / Single Licensees.
Electricity Transmission and Distribution losses in India during were extremely high and varied between 30 to 45%. Theft of electricity, common in most parts of urban India, amounted to 1.5% of India's GDP.
The financial health of SEB’s had become a matter of grave concern. The gap between Average Revenue Realization and Average Cost of Supply had been constantly increasing.
The major factors responsible for financial sickness of SEB’s were:
• Skewed tariff structure leading to Unsustainable Cross Subsidies by State Government. • Huge T&D losses, largely due to outright theft and un-metered supply. It has been estimated that theft alone caused loss of about Rs.20, 000 crores annually. • Lack of Accounting and Accountability in power distribution. • Large man power – 27 to 30% Revenue was used for establishment
References: 1] GOIa:Working of State Electricity Boards and Electricity Departments, Annual Report Planning Commission, Government of India, April 1999. 2] GOIb:Working of State Electricity Boards and Electricity Departments, Annual Report Planning Commission, Government of India, June,2001. 3] GOIc: Working of State Electricity Boards and Electricity Departments Annual Report Planning Commission, Government of India, May 2002. 4] GOId : Approach Paper to the tenth five year plan (2002-07), Planning Commission, Government of India, September 2001. 5] GOIe :Tenth Five Year Plan, Planning Commission, Government of India, New Delhi, 2002. 6] Ahluwalia, S.M, “Power sector reforms: a review of the process and an evaluation of the outcome” NCAER, Delhi, March 2000. 8] General Review 2005, All India Electricity Statistics:, Central Electricity Authority, Ministry of Power, Government of India, New Delhi, January, 2005. 9] General Review 2006, All India Electricity Statistics:, Central Electricity Authority, Ministry of Power, Government of India, New Delhi, March, 2006 10] Dossani, “Reorganization of Power Distribution sector in India,” Energy Policy, vol 11] Integrated Energy Policy- Report of Expert Committee , Planning Commission, Government of India, August, 2006 12] www.mercindia.org.in {Maharashtra Electricity Regulatory Commission (official website)} 16] The Electricity Act, 2003 17] Law of Electricity in India – Justice L.P.Singh