30-Nov-2009

re: Delhi power supply (cont'd - 2)

[This was posted to Hasiru Usiru mailing list]
Continuing, some more points raised earlier , which I could not reply to. The red-colored text is my original points to which you replied (marked blue).

BESCOM has the corresponding figure at 9.5%.

In the Hindu report (to which a link was provided) the line "Power theft was being accounted for as T&D losses, the Minister said" is significant. In power sector parlance, T&D losses have from long been known as "theft & dacoity losses", and the incapacity of the government to curb it is the root cause of all the problems. In fact, when Delhi power supply was under DESU, a state cabinet minister was operating a high-consuming battery charging unit from an unlicensed connection, right in the heart of Delhi.

The following excerpts from the KERC site, in this connection, are significant:

a) BESCOM distribution losses (FY09) for cities is 8.73%; for rural areas - 26.22%; Aggregate - 16.81% - shows they have not been too successful in curbing the theft in the rural areas

I don't get the point that you are trying to make.

AT&C losses = T&D losses + collection losses.

T&D losses include theft losses. Collection efficiency for BESCOM is 97%, very much comparable to NDPL (Delhi's Tata discom). Hence the 15% AT&C figure of NDPL & BESCOM's 9% figure are comparable.

And Bescom's Bangalore figures are better to use for comparison rather than taking the Bangalore + rural figure, because Delhi is supposed to be 95% urban. But even taking the urban + rural figure for BESCOM, 16.81% is not that far away from 15% (for NDPL). Especially considering that BESCOM serves a geographical area of 41,092 sq km (population of 139 lacs), because of which technical losses would be expected to be higher, whereas NDPL covers a compact area of 510 sq km (with a population of 50 lakhs). (See KERC Annual Report 2009 for the state ESCOM details, including BESCOM details).

I'm wondering what if BESCOM was broken down into smaller ESCOM's? Wouldn't it perform better? Another point is that BESCOM's regulator (KERC)'s loss target for BESCOM for '09 was 19%. BESCOM has achieved 17.94% (KERC Annual Report 2009). By the way MESCOM's numbers are even better, around 10% I think!

Also, as noted in the previous mail, interesting that NDPL's projected surpluses for '07-08 & '08-'09 vanished in the face of higher input cost etc(see page # 3 http://www.derc.gov.in/ordersPetitions/Petitions/MYTARR20092010/Distribution/NDPL.pdf). Not sure what the minister has got to do with it other than illustrating that politicians can be thieves too. Not hot news for sure.

I am very wary of privatization, especially since private players are not covering themselves in glory nowadays.

How many of the government players are covering themselves in glory, even when they have monopoly? And, I am largely against monopoly - government players can remain as long as the field is not sloped too much in their favour, which is rarely the case, like in the case of BSNL - check here

So the point is : private companies have issues, public utilities have other issues. We need a in-between solution. Being a public utility, BESCOM has improved its performance significantly over the same time period that Delhi 'privatization' has gone on. It even turns a profit. A public utility is doing well in Mumbai (BEST). So privatization is the solution to what problem exactly?

My own take is, the power generation is a bottleneck and unless that improves, it doesn't really matter. Both public or private players will have problems. Of course, we could privatize power generation - don't know if it has been done. If yes, has it succeeded? Again, facts would be welcome.

There are enough players, and the ones that are not dependent on the state-run distribution utilities alone, are all doing well - Reliance's Dahanu 500x2 MW plants for instance.

I concede the point. But there are problems even when the power generation companies depend on 'private' players. Delhi Transco (DTL) has a Rs 1500 crore revenue gap for 2009 (see Coming soon: power tariff hike 'from 5 to 50 paise'). Meantime, it is fighting for money due to from the private discoms (see Power tariff likely to go up):

DTL's plea was also that if the money was to be remitted to it, it would reduce the overall revenue gap in the sector. DTL had urged the Tribunal to ensure that the money was released by DPCL or by DERC after directing the discoms to raise the money.

And, required tariff hikes (so the discoms can pay up) were not and are not happening smoothly (as noted in an earlier mail).

Alternatively, we could have purely intellectual arguments about publicization/ privatization, without regard to facts. I'm not sure if I would be able to contribute myself, but I'm sure there are other capable folks who can pitch in.

My arguments are all backed by facts - check this and this

I don't think so.

Both are links to Praja. In the first link which is a post by you on Praja these are the facts I found, after sifting through lots of opinions:

  • You mention a co-op in Belgaum buying power from KPTCL & doing a good job of supplying it to rural areas (No link provided). This fact is not correct – the co-op buys at bulk rate from HESCOM a PUBLIC escom (Reject rise in tariff, society urges KERC). (They made a petition to KERC to ask HESCOM not to raise tariff & KERC made some interesting observations - see KERC order).
  • Then, a commenter posted a long article from India Today about Vasundhara Raje's efforts in the power sector – which mentions that 22000 villages are getting 20 hours of residential power supply & 5 hours of agricultural supply. (Rajasthan experience discussed below)
  • someone asks for T&D losses in Karnataka & BESCOM
  • You mention transmission losses of 30-40 percent (not mentioning if the number is for India or Karnataka or BESCOM, no link provided). I'm not sure what this transmission loss refers to. BESCOM's T&D losses are 9% for Bangalore, and 17.94 % overall.
  • You quote an article that quotes an anonymous industrialist who mentions that the state has lost 180MW of power co-generation capacity because politicians were corrupt. Well, anonymity is a great thing.
  • You mention Bangalore has 80% recovery. I'm not sure what this means. BESCOMS collection % is 97%.
  • Then there are some facts about power theft. They mostly mean little - instead of number of cases of power theft, we could just talk about distribution losses (T&D + collection losses, AT&C etc)
I get a mostly anti-public utitlity angst from reading all that than anything else. As for Rajasthan's experience, the World Bank seems to have been involved in the power sector restructuring there. They were not able to privatize distribution (WB report from 2007):

One of the covenants, "offering majority equity stake to private sector in the distribution companies", which was also a key performance indicator, was deleted, by agreement with all parties, during the project implementation. The reason for this was that the prevailing conditions in the Indian market were not conducive to privatisation of distribution assets.
...
Discoms are projected to achieve a turnaround with subsidy support by FY2009 and full financial turnaround without subsidy support by FY2012."

In "lessons learnt" , they say:

The expectation of the pace at which the reforms can be implemented and the outcomes realized should be realistic. Given the socio-political constraints the pace of reforms will be determined by the willingness and capacity of the governments to address key reform issues. Expectations of financial turnaround and phasing out subsidies should, similarly, be realistic. In reality, the government would generally need to provide substantial financial support during the transition period to meet the cost of reforms (e.g. financial restructuring costs, employee liabilities, explicit provision of subsidy as per regulatory directives etc.). This would thus require prudent prioritisation of the government's expenditures and public policy decision-making during the transition.

Subsidized power supply to agriculture is a broad public policy issue, not just a sectoral issue. The problem of subsidized power supply to agriculture and resistance to metering is embedded in the political economy of distorted agricultural policies.

Sustainable improvement in power sector requires this complex economic and political problem to be addressed.

That is about Rajasthan's attempt. Ms Raje I'm sure will be thinking what went wrong in more ways than one.

The second link is about bussing, and includes a comment by me also. There you promote private competition & take it for granted that BMTC will not be able to resolve the issues come what may (which is a bit naive considering that they are carrying around 40 lakh people per day). A commenter named Vasanth brings in some valid counter-points which I mostly agree with.

As for the transport situation, the problem as I see it is again lack of road space for buses. Once buses can move freely without getting jammed up, I feel public or private - anyone would do a good job. But a public player would keep fares down.

May be you should read about the extent of pilferage in BMTC, in today's Indian Express. Besides, what justification is there for the monopoly?

Pilferage will always be there – whether a conductor does it in BMTC, or a private company does it by 'creative' accounting. I still maintain that lack of road space is the problem. Again, there can not be a true competition – we would have to have various levels of roads in the air above us to support 100's of transport companies. So in the end, there will be effective monopolies or duopolies or some such. And if we restrict artificially the number of private players, we knowingly welcome collusion & cartelisation.

Witness lowering of broadband rates on account of BSNL.

It is because of open competition, and inspite of the non-level playing field.


Anyway competition is eating into the financial statements of the telecom companies. They are complaining that there are too many competitors :-) As to non-level playing field – I'm sure BSNL does enough to operate on a different level – connecting remote areas, rural areas and so on.

In subsequent mails, I'll put up some of Prayas' findings & a study by Brookings Institute/UTI Bank.

Regards,
Dinesh.

27-Nov-2009

re: Delhi power supply (cont'd)

[This was posted to Hasiru Usiru mailing list]
Some more replies.

And, quite like PRAYAS, what I have stated (in the concluding para) is appended below:

It's nobody's case that privatisation is the panacea for all the ills. There will continue to be problems. But, like the late Sri C Subramaniam had once stated, atleast these will be new problems, and not the same old ones for which we have no solutions for over half a century.

Prayas (http://www.prayaspune.org) has refused to take a strict pro- or anti- reforms/privatization stand since they feel that would be unhelpful (note: reforms may or may not include privatization). But they do suggest abundant caution & re-thinking.

However, unlike them, pushing for privatization of everything (power, water, waste management, transport) even while admitting that it may not solve all the ills, is like wanting to eat the cake and to keep it too. And while Sri C Subramaniam was entitled to his opinion, I'm not sure I'm ready to invite new problems when I can't solve current known problems. Then again, they may not be new problems at all. At least some of the more intractable ones will not be new problems. I list some of these below:

  • Greed & questionable behaviour
1. Selling power for higher returns: All three discoms sold power for profit outside Delhi during days of power cuts lasting 12 to 15 hours a day (see Power of profit). Apparently this type of thing even has a name. From Prayas' Of Rocks and Hard Places': Enron took advantage of the two part market in California by overscheduling load such that they could sell more power in the lucrative hour ahead market, a strategy they called 'Fat Boy'.

2. Inflating capital expenditure (which has a direct bearing on tariff) : Reliance discoms can't pass on Rs.535 crore to Delhi consumers - APTEL: "A senior DERC official explained after power distribution was privatised in the Capital, discoms had been directed to invest in capital goods — equipment among others. The purchase of Distribution Transformers by BSES discoms from its sister concern M/s Reliance Energy Ltd was at inflated rates, The transformers were purchased from Reliance Energy and found to be exorbitant and the rates were higher by 68 percent from the market rates. The regulatory commission which procured the VAT bills showed that the material was sold for 731 crores and the discoms showed an inflated price with profit margin of 68 percent and tried to pass on the buck to consumers. Procurement of equipment by Reliance backed discoms at higher rates amounts to loading the extra cost on the consumers of Delhi and further to give undue profit to the Discoms as well as the supplier which is the sister company of BSES." The Apellate Tribunal of Electricity agreed.

This has been happening from the beginning. Inflated capital expenditure claims: Capex affects tariff rates the discoms can charge, higher the capex, higher the tariff. Prayas notes in their 2007 Prayas' Delhi Summary Report that the Reliance companies are notorious for their exaggerated capex claims. For instance for '04-'05 they claimed Rs 800 crores, DERC cleared only Rs 525 crores.
  • Manipulating numbers to boost profits:
In their summary report on Delhi's experience written in 2007, Prayas notes that ABR figures for BRPL/BYPL (the Reliance companies) were not matching DERC's projections. According to Prayas: The unexpected behavior of Annual Billing Rates and consumption that we have discussed here all have significant effect on the revenues and tariffs, and are also linked to the validity of the AT&C loss reduction calculations. (see Prayas' Delhi Summary Report). And while NDPL (Tata discom) didn't use this approach, their distribution costs were the highest, inspite of having a good network (see Prayas' Delhi Summary Report)! Prayas urged regulatory vigilance on this aspect.
And no, saying only Reliance is bad (while praising the same company's performance in Mumbai) doesn't cut it. Two private players. If one of them is bad, that is a bad-to-good ratio of 1.
  • Regulatory lapses/capture/incompetence
Inspite of the Delhi Transmission company (Transco) pointing out the ABR issue to DERC (the Delhi regulator), the latter did not investigate(see Prayas' Delhi Summary Report ). Why? Prayas has pointed out that regulatory action is wanting. Will it every become sufficient?

No, if the US experience is anything to go by. Private utilities have existed in the US for a century or more. I'll quote here from Prayas' report on the US power sector reforms (Prayas' US Report): "As another point of comparison, the US Federal Electricity Regulatory Authority (FERC) has a staff of about 1200 [Hunt 2002]. Despite these considerable resources, the Chairman of FERC was quoted in the aftermath of the California crisis as saying that US regulators had "a long way to go" to match the sophistication of the companies it regulates [Egan 2005]."

In the 'Fat Boy' context, Prayas (same report) notes: Indeed, the example of Enron in California suggests market designers will be hard pressed to stay ahead of those who seek to game the market".

  • Framing of rules tilted in favour of the private companies (Sweetheart deals)

1. A 16% Return on equity is guaranteed to the Delhi Discoms! NDPL makes profits even when it shows a revenue gap, as it does in this recent 2008-end presentation ( http://www.derc.gov.in//ordersPetitions/Petitions/MYTARR20092010/Distribution/NDPL.pdf). (The revenue gap is typically filled by tariff revisions.)

Interestingly, revenue surpluses of Rs 8 cr & Rs 208 cr were estimated for NDPL for 2007-08 & 2008-09 respectively. They turned out to be a mirage and turned into revenue gaps of Rs 213 cr & Rs 155 cr (see page # 3 http://www.derc.gov.in/ordersPetitions/Petitions/MYTARR20092010/Distribution/NDPL.pdf) No doubt they will get this back through tariff hikes or failing that through subsidies.

Why is this such a big thing? An article from 2005 in Business Standard, Chronicle of a crisis foretold explains it, quoting Haldea from National Council for Applied Economic Research:

According to Haldea, this ensures the firms will earn 59 per cent on their capital base and this could go up to 181 per cent in case they are able to lower losses to the level of, say, NDMC! [note: NDMC is the public utility supplying Lutyens' Delhi] (To understand how this works, in 2002-03, NDPL had equity of Rs 368 crore but free reserves of another Rs 50 crore; in the next year, the equity has remained the same till date but the "free reserves" has gone up to Rs 224 crore.)

The article also notes the problem with the process for setting targets for AT&C losses when the deal was finalised. This has an big impact on the profits that these companies make. The consultants (Tata Consulting Engineers) to the privatization projected 20% reduction in losses in the first five years. Reliance & Tata wanted only 13-14% reductions (see Prayas' Delhi Summary Report). 13-14% of the 50+% of the then losses - that would leave AT&C losses at around 40%! Why were they so reluctant?. As the above article explains:

What makes the deal even sweeter is the incentives given for loss reduction. After a certain level of reduction (the 17 per cent or so reduction that the firms have agreed to over 5 years plus a few percentage points more), the firms get to keep half the gains from the reduction (this works out to roughly Rs 30 crore for every one per cent reduction in ATC losses).

This, in fact, is the biggest problem with the deal signed by Dikshit's government in 2002 since, even five years after privatisation, the BSES twins [BRPL/BYPL] and NDPL will still have losses of around 33-34 per cent — so, customers will end up paying 50 per cent more than what power costs even in 2007-08. To put this in perspective, Mumbai has a loss level of around 11 per cent, Ahmedabad is around 14 per cent, Surat 15 per cent and the NDMC area in Delhi is around 16 per cent. While both BSES/NDPL and the government of Delhi argue that the loss reduction agreed to in 2002 was the best they could have got since it was got by bidding and no company bid higher than this, this is contested by Gajendra Haldea, chief advisor on infrastructure at the National Council of Applied Economic Research (NCAER). Haldea had argued then that when there were just two players left in the bidding process, the Delhi government changed the rules of the game — an additional loan of Rs 850 crore was provided to lower power supply costs, the minimum performance requirements were lowered by Rs 1,000 crore, among others — and had these been offered to everyone, there would have been better bids.

2. And then, the companies were given a clean balance sheet to begin with, and allowed to collect DVB's arrears and keep 20% of those (see next point)! Also, they got their majority stake in the discoms paying up a smallish Rs 481 crores for all three discoms combined ( see A Challenging Phase). Valuation of DVB's assets & other interesting happenings during the privatization itself are covered in Accountability, my foot & The Way to Accountability (there might be an element of politics involved if one notes the author of these two articles. But still - he does not make up any fact & quotes the PAC draft report).

One of the critical features of the power sector restructuring in Delhi has been the large financial support provided by GNCTD. Through the transfer / restructuring scheme the GNCTD provided clean balance sheets to successor companies. In this massive financial reengineering process, nearly all past liabilities (around Rs. 19,000 Cr.) were taken over by GNCTD (i.e. essentially written off). Additionally, the government provided Rs. 3450 Cr. as transition support (over a 5 year period) and also contributed Rs. 886 Cr. towards employees pension trust.

For the first five years from 2002, the discoms were basically allowed to pay whatever they had left after all their expenses were covered (see Prayas' Delhi Summary Report). Rest would be made up by the govt in the form of subsidy. The total amount was estimated to be Rs 3450 Crores (the same Rs 3450 crores mentioned in the previous paragraph), not sure what the actual figure was. I will safely assume it was at least that much. After the transition period (first 5 years), the loan was supposed to be paid back. Interest on the loan at 10% works out to Rs 345 Crores. What about the repayment of the loan? I can't find any info on it. Meantime there are questions (see Tribunal strikes down Delhi Electricity Regulatory Commission move to create "regulatory assets" and avoid a tariff hike):

"The Rs.3,450-crore support granted by the government was intended originally as a loan that would have to be returned on terms decided by the two parties. While the details are yet to be made public, the funds will probably have to be raised through further tariff hikes."

2. Delhi Transco (one of the firms from which the dicoms buy power) is projecting revenue gap of Rs 1,500 crores in 2009 (see Coming soon: power tariff hike 'from 5 to 50 paise').

3. Then in 2005, Delhi govt gave a three-year subsidy of Rs 90 crores per year (see Amid outages, Delhi govt ends power subsidy). That has apparently been rolled back, after the three years. Who knows when it will be back? Power or opposition benches - difficult choice to make.

4. Then there is a annual subsidy Rs 184 crores subsidy for weaker sections & agricultural sector which is ongoing Delhi to give power subsidy for domestic, agricultural consumer).

So we can count the subsidies as : One-time pension trust donation of Rs 886 crores + annual interest of (at least) Rs 345 crores + pending principal amount of Rs 3450 crores + Rs 180 crores (for '05, '06) + Rs 184 crores (for weaker/agri sectors).

This does not include loans given to these discoms by the govt etc. This also does not include hidden subsidies to the private discoms like land etc... Tata's are looking for land to build gas-based generating stations in & around Delhi. So subsidies go on, privatization or not.


  • Collusion/cartelization between the private discoms

    1. Collusion started right at the beginning. The AT&C loss reduction estimates provided by Tata & Reliance in their bids for the license, were suspiciously in the same narrow range – 13-14% (see Prayas' Delhi Full Report). Prayas notes that this is very surprising. These were below the 20% minimum required by the bidding process, but the govt did not reject the (only) two bids, but renegotiated with the two bidders to 17%! (see ).

    2. And, NDPL (tata company) buys power for both NDPL & BRPL/BYPL (see Prayas' Delhi Full Report). Nice work! But weren't they supposed to be competitors? Moreover the tariff is same across the discoms. So if one is successful in fixing things so that it can get a tariff hike, the other can benefit form that. I just can't see any problem with that arrangement!

  • Unaccountability/transparency

    The Delhi Govt has a 49% stake in NDPL & BRPL/BYPL. Hence, according to some people, they should come under the RTI Act. The CIC agreed. But the discoms went to high court and got a stay (see DERC report). What are they so afraid of?

  • Tariff setting
Then there will always be the problem of tariffs (from Chronicle of a crisis foretold):

That is, by now (Year 4) tariffs would have risen by 40 per cent. The actual hikes, on the other hand, are just around 11 per cent. In fact, in order to keep the tariffs hikes low, the Delhi government provided Rs 3,450 crore of taxpayers' money to give BSES and North Delhi Power Ltd (the two companies which bought over DVB's assets) power at a subsidised rate.

And furthermore, besides these generic problems, there will be problems specific to the power sector. And they are not trivial problems (as the Prayas reports point out).

Delhi apparently is now paying a high price for having delayed the reforms process. Bangalore will perhaps have to pay an even higher price. Actually, it's already doing so, if one takes into account the enormous cost of stand-by (in many cases - mainstay) power that the entire city (as well as the state) population is dependent on - check this

BESCOM is not doing too bad. More on that in the next mail.

Regards,
Dinesh.

26-Nov-2009

re: Delhi power supply

[Note: these were posted to the Hasiru Usiru mailing list. It is a follow-up to earlier exchanges on need for privatizing power distribution in Karnataka/Bangalore]

Sorry for the delay in responding. I took some time to get a bit more informed on the subject. I went through the reports by Prayas and also tried to look at what information is available online. It has been interesting & eye-opening. It is a complex issue. There is no silver bullet, including competition/privatization. There are alternatives.

To present the other side of the argument, I've gathered your comments (marked blue) from a couple of unanswered mails & tried to address them in this mail and in subsequent mails over the next few days. Then some general lessons on power sector reforms put forward by people who've looked at this issue closely. I've provided backing external links to mostly everything. Unfortunately some of them are PDF files - can't help that.

I feel this is relevant to HU so am posting on this list too.

To begin with, a comic aside in the Delhi 'privatization' saga, from a July 2009 (i.e., after 7 years of successful "privatization") newspaper article: NDMC power still in sarkari hands:

With performance of the power discoms coming under scrutiny most often from the Government and citizens, Lutyen's zone has been spared the 'erratic' privately managed distribution network that rules other parts of Delhi. The electricity supply in Lutyens' Delhi will remain in sarkari hands.

The Government has turned down the request of private parties seeking distribution of electricity in NDMC area stating that the area is inhabited by the VVIP's and VIP including foreign dignitaries.

Delhi Cabinet on Monday approved a policy direction to Delhi Electricity Regulatory Commission (DERC) for not granting license to private operators for distribution of power in the Lutyens' Delhi area.


Now to some of your points.

Further, apart from Delhi and Mumbai, the cities/ areas that 'enjoy' power supply from private companies are Ahmedabad, Surat, Kolkata, Greater Noida, and in all these places, the customer satisfaction and profitability levels are far higher than elsewhere where the supplies are with government companies/ agencies, all being subject to uniform regulation by the respective SERC's. So, there must be enough merit to it. And, perhaps learning from the experiences in Delhi, the switch-over in other cities can happen more smoothly.

First point, on Delhi as an example of privatization. The distribution companies (discoms) BRPL/BYPL (Reliance), NDPL (Tata) are all joint ventures with the Delhi Government. True, they are run by private players, but the Delhi government has a 49% stake in each of the three companies BRPL/BYPL (Reliance) (see Fresh Equity for Reliance Discoms), NDPL (Tatas) (see NDPL Profile). That is, they get all the upside of being a private company while they also get the backing of the government stake (I'm guessing this will result in eaiser/cheaper financing at the lest). A nice deal for the discoms. And on top of that they are effectively monopolies (discussed below).

Second point - it doesn't make sense to say only one player (Reliance) of the two is bad so it is OK. One player out of two is 50%. And when you support the same player in Mumbai, inconsistencey results. An reasonable way to resolve the inconsistency would be to seriously consider the possibility that the approach taken (in Delhi) may have its limits, based on local contexts etc

Now for list of cities 'enjoy'ing power supply from private players. Just repeating the same thing over and over doesn't make it true. Show me a reliable study that claims that for all the cities & I'll concede the point. Information is available for Delhi. In Delhi, after 5 years of 'privatization', 60% of consumers reported problems as regards load shedding (see page number 4 of this DERC report).

Why wouldn't the consumers complain? Load shedding is happening apace! Look at this document which lays out the scheduled outages from Oct 2009 to Apr 2010 for NDPL: NDPL Load Shedding schedule. However, they mention in that schedule that these will be the likely outages if power shortage occurs. But on their main site (http://www.ndpl.com) they list ongoing maintenance work & resulting outages for the current day and one day before. It is a pretty long list with hours of maintenance at each location (the list of outages for 26th Nov 2009 are attached to this mail)! Maintenance or load shedding – who knows! Loadshedding has apparently been so problematic, that as recently as 10 Nov 2009, DERC has threatened to impose fines for unnecessary loadshedding :DERC decided to fine private discoms for unjustified load-shedding

Of course, following that 60% statistic the DERC document simply asserts that consumers are happier with private supply as compared to earlier times: "However, the Survey found that the consumers preferred the services rendered by the Discoms over those of the erstwhile DESU/DVB." Well, why no % number to that statement? If the % of users saying that was, say, 100% then I'm sure that statistic would have found its way into the report. I'm guessing even if it was 51% it would have. But apparently it didn't, so they've gone ahead and just made up a blanket statement.

As for other cities 'enjoy'ing private supply. In Mumbai, BEST & the Reliance discom are doing well as you point out. Tata Power supplies only to bulk customers. BEST is a public utility. Its distribution losses stood at 10.5% for 2007-08 & 2008-09 (see Final Copy of APR Petition ). I couldn't locate loss numbers for the Reliance discom, but they surely won't be better than BEST's. 10.5% loss percentage is better than Delhi NDPL. Kolkata is left with a monopoly (RPG group) and lots of google'able news reports on issues with load-shedding. This old article in Outlook discusses how unsavoury the privatization itself was and what good terms the RGP group got out of it: High-Powered Immunity . This article from The Telegraph shows how power shortages persist: Ahead: Loo & loadshedding. Torrent Power supplies to Ahmedabad & Surat. It is half the size of BESCOM, supplying 10 billion units anually over an area of 408 sq km (see Torrent website), vs BESCOM's 19 billion units over 41092 Sq. Kms (see BESCOM website). And their users are mainly better paying industrial & commercial units (since Ahmd & Surat are industrial & commercial hubs as they themselves claim on their website).

Also, let us not forget that privatization of the distribution business in Kanpur was unsuccessful (apparently because there were no bidders, see Prayas' Global Reform Overview). Orissa & MP gave up on electricity reforms (see Prayas' Delhi Summary Report.). In Orissa, private discom AES just up & left, leaving it to the Orissa govt to pick up the pieces including a Rs 400 crore due to the Grid Corporation of Orissa (House panel to review Orissa-AES share pact). So at best, experience with reforms/privatization is mixed & heavily local context dependent (something borne out by other observers). Of course, there is international experience too which I'll put up later.

That's true - it's a natural monopoly situation. But, what you do in such situations is to divide the total area into two or three districts/ zones, and allocate it to different players, and the regulator periodically publishes comparisons of their performances based on given parameters. And, that's what Delhi has done. And, with the Reliance's performance showing to be poorer than that of TATAs, there's pressure on them to do better.

That still leaves us with private monopolies, instead of state monopolies. Same seems to be the case in Kolkata (RPG group). For true competition, the end-user should be able to choose his power provider. We are aeons away from that. And in any case, the benefits of open access are themselves not proved & the costs could be prohibitive (more on that in later mails). And when distribution companies integrate generation, market power results.

As for pressure to perform, what does the pressure do? For example, after seven years, the Reliane discoms' T&D losses are at 23% & 27%, for BRPL & BYPL resply (see India Infoline news report ). Those numbers are excluding collection losses I presume, meaning a slightly bigger loss % if that is factored in. It's been seven years and lots of money & effort but BYPL & BRPL (Reliance) haven't been replaced. So when will it change?

Only two companies (namely Reliance & Tatas) submitted bids when distribution was 'privatized' (see Prayas' Delhi Summary Report ), why will the other competitor come in now? Or should their license be canceled & their areas go to Tata's NDPL, making it a total private monopoly instead of a duopoly as of now? Or do we give them 60 years (since we've gone with public utilities for at least that many years after 1947)? And meantime the 'competitors' are competing well, with the Reliance companies allowing NDPL (the Tata discom) to procure short/medium power on their behalf (see DERC report). A bit like Wipro & TCS asking Infosys to do recruitment for them. And they end up purchasing power from a company in which majority stake (76%) is held by a Tata company, Tata Power (this was approved by DERC, see DERC report).

Resulting out of it all, the quality deteriorates, and whereas the rich can then switch to genset, inverter, converter, etc, the poor are left at the mercy of the weather gods. Apart from this is the burgeoning subsidy bill, which ultimately gets passed on to the consumer.

On the other hand, when an Anil Ambani controlled Reliance sends its bills, even Dawood Ibrahim's henchman in Dharawi and Bal Thackeray in Matoshri, better up on time, failing which they will face disconnection as much as any ordinary human being. As a result of it all, power supply is so reliable in Mumbai, that not many people even know what a genset is.

Real life is not so simple. Let hear what the distribution companies (discoms) in Delhi have to say on commercial losses (see DERC Report). In the report, DERC mentions a public hearing involving DERC, discoms, the public, DTL etc, in 2008 (i.e., after 6 years of 'privatization'). From the 2008 DERC annual report (DERC report):

Some of the consumers expressed apprehension on the evaluation of energy losses by the Discoms because the Discoms had neither carried out audit of energy supplied by distribution transformers nor on the corresponding connected consumers. In act, they questioned that as AT & C losses are due to inefficient management of business, the consumers cannot be made to pay for such inefficiencies. They also requested that those areas where the AT & C losses were below 20% should be spared of power cuts.

[Note: No energy audit after 6 years (the commission had to ask them to do energy audit! In response, the discoms listed their achievements, then they had this to say]

the discoms...also expressed the following difficulties in achieving the desired AT & C loss reduction:
i) Effect of socio-political environment and public resistance in certain areas.
ii) Presence of a large number of unauthorised colonies and JJ clusters.
iii) Level of theft in unauthorised areas is high due to limited infrastructure.
iv) Use of domestic connections for industrial purposes.
v) High costs incurred for using technical solutions in rural areas, thus rendering the whole exercise cost ineffective.
vi) Non electrification of unauthorised areas even though residents are willing to pay for electricity, thus, leading residents to use power from neighbouring networks.
vii) Public resistance to the replacement of electro-mechanical meters with electronic meters.

Well, forget Dawood, they are helpless in front of less sinister people! And they have reason to be helpless , they are getting attacked when they go checking theft : Mob Attacks NDPL Enforcement Team. Let's face it - it is a deeper problem, technology and force can only get the discoms so far.

I have shifted the entire debate here. Perhaps it is best furthered there.

Please don't shift the debate to Praja. Please put all the arguments & facts here itself (backed by a working link to the source and also Praja if necessary). Privatization & reforms, especially of essential services, is of relevance to HasiruUsiru. At least, I presume it is. And I really don't feel like sifting through lots of opinions to get to some facts.

I'll address other points raised, in later mails. It is a dry topic but interesting nevertheless.

Regards,
Dinesh.