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Analysis | April 2012

Metamorphosis of Delhi distribution

It is time other states take a leaf out of its reform measures to create a sustainable distribution network, says Lalit Jalan.

Power distribution is the last and the most crucial link in the power sector value chain and is a major contributor in the revenue generation cycle. However, in India this sector has been consistently mired in difficulties, many of them self-inflicted. Energy theft, ill-equipped distribution and network systems, lack of a robust technology infrastructure, huge cross-subsidies and political interference are some of the key factors that act as growth deterrents in this sector.

India’s transmission and distribution losses are amongst the highest in the world. The cumulative revenue loss in the distribution business stand at approximately 1 per cent of the country’s GDP. The steady increase in losses borne by the distribution sector as a whole is alarming. At present the demand for energy far exceeds supply and with losses increasing at 21 per cent CAGR, the sector is fast approaching the threshold of its loss-bearing capacity with average revenue realised (ARR) significantly lower than average cost of supply (ACS).

It is imperative that immediate action is taken to nurse the distribution sector back to health since the depleting financials of this capital intensive sector threaten to stall the growth of the entire G-T-D chain. With the government making huge investments (approximately Rs 8-11 lakh crore) in the power sector in the 12th Five Year Plan, the importance of reform measures to safeguard heavy investments in the sector is self-evident.

While most Indian state electricity boards incur an average loss of 35-40 per cent, the Delhi NCR region has performed much better than other states. The reform measures introduced after the privatisation of distribution companies by the Delhi government and implemented by Reliance Infrastructure and Tata Power have helped the once struggling Delhi distribution sector turn in a better financial performance.

DELHI DISTRIBUTION SECTOR – THEN

Until 2002, the distribution sector in Delhi was struggling with an inefficient developmental framework and crippled with problems arising from high theft and AT&C loss levels.  Not long ago, Delhi was dubbed as ‘the power theft capital of the world’. The state distribution companies (SDCs) operated in a closed manner beyond the pale of any regulatory bodies. The distribution system and network was weak and technologically inadequate. Poorly maintained and overloaded systems coupled with a lack of timely capital investment on upgradation resulted in low demand side management and high losses.
The tariff structure was heavily skewed, leading to unsustainable subsidies by the state government. Political interferences and involvement of criminals with vested interest further exacerbated the problem. Lack of professional management and corporate governance resulted in lapses in accountability and distribution.

There were no efficient customer care systems to address the problems of consumers. Deep-rooted corruption and a monopolistic approach resulted in neglecting customer service. In most of the SDCs the average age of employees was above 50 years. Though induction of fresh talent with specific domain expertise and training required for the smooth functioning of discoms was absolute necessary, in most state-owned utilities recruitment had been stopped or restricted for more than 15 years. An advanced technological set-up was also missing. In short, the poor performance of the sector contributed to significant YoY losses.

The Accelerated Power Development Reforms Programme (APDRP) was introduced to address the issues of AT&C losses, improve customer satisfaction and bring greater transparency in the functioning of the SDCs. However, the effectiveness of such measures remained inadequate. In such a market scenario, it became imperative to introduce reform measures to correct the anomalies.  Like other state-owned discoms, Delhi Vidyut Board (DVB) was stumbling to achieve sustainability and financial stability. The government of Delhi initiated the privatisation process; however, private discoms were not keen in participating in absence of adequate incentivised framework in place.

DELHI DISTRIBUTION SECTOR – NOW

Reliance Infrastructure spearheaded the privatisation process by acquiring two of the three discoms offered for privatisation. After Reliance Infrastructure picked up the gauntlet of re-engineering the distribution sector in the national capital, Delhi is performing far better financially than most of the other states.

The reform measures introduced by Reliance Infrastructure have seen its customer base increase. Our company now has an estimated 80 lakh customers in the Delhi NCR region. Besides correcting basic structural and operational faults by introducing automated meter readings to mitigate theft, introducing equipment management system (EMS) for better network management, driving quality across the organisation (more than 100 quality projects taken under SGA and Six Sigma etc.), Reliance Energy has also taken the following initiatives:
  • Remote monitoring controls spread over distribution areas for around 20,000 locations
  • GIS-based network mapping and asset management system
  • Introducing IT-enabled processes for all customer care initiatives, operations and maintenance activities, customer communications, etc.
  • Putting fault passage indicators on cable network to minimise downtime
  • SCADA–DMS for better network management
  • Establishing more than 2,200 bill payment options against previous conventional payment counters
  • Introducing choice bill languages including Braille bills for the visually impaired.
Reform measures introduced by our company have changed the dynamics of Delhi’s distribution sector. Poorly-performing power supplying companies have been transformed into world-class utilities across all key performance parameters, demonstrating reliable quality with international standards and delivering superior value for all stakeholders. Delhi is moving towards achieving the status of a zero power-cut city. A comparison between the pre- and post-reforms scenario in Delhi’s distribution sector can be seen in the table above.

Summing up, I’d like to say that prioritising reform measures to meet future demands is the need of the hour. Timely and adequate reform measures have seen the Delhi distribution sector through trying times. Today, Delhi enjoys the benefits of a robust, uninterrupted and a sustainable electricity and distribution network.

It is high time that other states take a leaf out of Delhi’s reform measures to create a successful model for a sustainable power distribution network. No amount of crystal ball gazing can help in this cause. Only successful reforms can help meet the power challenges faced by the nation. The road ahead is uphill and good roadmaps are in short supply.
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