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.

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