Private/Corporatised Healthcare in India

Health check for corporate hospitals

Devastating fires are only one part of the management of private/corporate hospitals. Thanks to the self-promoting glitz and chutzpah surrounding them, they are, in fact, the blind spot of both the governments and the people, as regards accountability and transparency. Occasionally, someone somewhere who has been the victim of their blunders or exactions, bursts out in exasperation as, for instance, in the following blog by a distinguished professor:

“The corporate hospitals scare the life out of a patient as part of the milking process. Most of the drama of treatment that goes on is just to empty your pockets and to fill theirs….We've given them power they don't deserve and respect they haven't earned.”

...

Here is an extract from an article by Dr Sumanth C.Raman, published in The Hindu of January 15:

“….no one really knows if the quality of care in these hospitals is as good as claimed as there is simply no organisation or body, government or private, that is measuring it. Almost none of these ‘centres of excellence' are willing to publish their outcomes or put up the results they get (with the patient risk stratification) on their websites as is done abroad. Browse through many major hospital websites in the developed world and you can check for yourself what their risk adjusted mortality rates are, their readmission rates, their infection rates, their quality indicators and attainment percentages for specific conditions like a heart attack, stroke and the like, their patient safety indicators, etc. Almost none of our corporate hospitals provide this information. Many do not even have the systems in place to measure these.

“All we have to go by is the assertion by these hospitals themselves through the glitzy ads we see in the media with an emphasis on the certifications they have received….(from) JCI Certified (Joint Commission International) or NABH (National Accreditation Board for Hospitals).….However, what these quality organisations evaluate is predominantly the capability of these hospitals to deliver quality care and not the actual delivery of quality care…”

And I thought this was really amusing, in a fiendish sort of way: 

I was actually present during the visit of JCI to a much hyped hospital for renewal of its accreditation. Normally, this hospital swarms with milling crowds making for unconscionable delays in attending to patients by doctors and the laboratory staff.

Just to dress it up for the JCI visit, the Chairman himself led his senior aides to drive the patients out and empty the corridors, so that everything looked swanky and picture-perfect.

But I believe health tourism is doing wonders for these hospitals.  So much so that practitioners are pressurised to take up the tourists on priority basis.

I always say - hand over everything to the private sector.  They will always do the best job.  Yes.

Dump Water Privatisation

Dump the idea says Deccan Herald.  

The idea of privatising water has been assiduously peddled by the World Bank, NGOs that receive funding to implement its agenda, business corporations, consultants and so on. Profits motivate their marketing of this idea but these proponents of privatisation have sought to sell their agenda on the principle of efficiency. They have held out privatisation of water as the solution to India’s shrinking water resources and mounting needs.  

It is a pity that the government has bought into this specious argument. The new water policy envisages the government’s withdrawal from acting as a service provider in the water sector. The government’s voluntary abdication of its responsibilities in a sector as crucial to life as water is shocking. 

Proponents of privatisation argue as if this is a magic bullet, a cure-all for all our water woes. 

Nothing is further from the truth. Privatisation will not only fail to address our existing water problems but also it will trigger new ones.

New Delhi Power Privatisation And How It Has Worked Out

No point in privatising if it doesn't help consumers 

Nigeria is reportedly so impressed with India's - and more specifically, Delhi's - model of privatisation of power distribution that it wants to adopt the Delhi model while selling off its own state-owned power generation and distribution businesses. 

... One wonders whether the Nigerian authorities have had a chance to actually interact with the beneficiaries of power reforms - Delhi's electricity consumers - before coming to the conclusion that the Delhi model was the best one to follow. 

...One also wonders whether Nigerian Regulatory Commission and the Bureau of Public Enterprises of Nigeria, the two government bodies which will be involved with the African nation's power privatisation process, have had a chance to go through the latest report of the Comptroller and Auditor General of India (CAG), which has lambasted the Delhi government for rising power shortages and a mounting power deficit, subsequent to privatisation. 

There have been many demands raised by consumer groups, the latest by the Residents Welfare Associations (RWAs) of the capital, for an independent and neutral audit of the accounts of the power distribution companies. The apex association of RWAs has even moved a division bench of the Delhi High Court seeking a court order for an outside audit.

The reason for this level of outrage and disbelief of claims by the government and the distribution companies are not far to seek.

Far from seeing a palpable improvement in service quality and delivery and a reduction in costs - the main promises made while justifying the power business - they have seen a sharp increase in power tariffs, falling service quality and growing outages and shortages. In other words, privatisation - as far as consumers are concerned - have made things worse, not better.

...In Mumbai, for instance, the stateowned - BEST is actually owned by the Brihan Mumbai Municipal Corporation - sells power at a lower cost to its consumers than its privately owned rival, has a comparable or better record across most service delivery parameters, and manages to meet the government's 'social obligation' of providing power to economically weaker sections of society

The Profit Motive

Over in the US, an utility in the private sector commits hanky-panky.  PG&E diverted safety money for profit, bonuses

Pacific Gas and Electric Co. diverted more than $100 million in gas safety and operations money collected from customers over a 15-year period and spent it for other purposes, including profit for stockholders and bonuses for executives, according to a pair of state-ordered reports released Thursday.

An independent audit and a staff report issued by the California Public Utilities Commission depicted a poorly led company well-heeled in its gas operations and more concerned with profit than safety.

The documents link a deficient PG&E safety culture - with its "focus on financial performance" - to the pipeline explosion in San Bruno on Sept. 9, 2010, that killed eight people and destroyed 38 homes.

 But privatisation will always work.  Yes.

Margaret Thatcher's Funeral May Be Privatized

TAXPAYERS PETITION FOR PRIVATISATION OF THATCHER’S FUNERAL

WHICH investment bank will underwrite the ticket sales at Margaret Thatcher’s privatised funeral?

The Capitalist only asks because, as of last night, more than 14,000 people had signed up to the e-petition posted by Scott Morgan declaring that the Iron Lady’s state funeral should be funded and managed by the private sector.

After all, Baroness Thatcher privatised the railways, the water companies, the electricity providers and the telecoms firms – so she should surely approve of the online rally to offer the “best value and choice for end users and other stakeholders” on her passing.

As the petition on the government’s website reads: “The undersigned believe that the legacy of the former prime minister deserves nothing less and that offering this unique opportunity is an ideal way to cut government expense and further prove the merits of liberalised economics Baroness Thatcher spearheaded.”

If the number of signatories hits 100,000 – as is looking pretty likely, since the petition runs until October next year – the Backbench Business Committee will present the idea as a motion in the House of Commons.

Time for City firms to start thinking of how to take a percentage of the profits, then – as Rothschild, which advised on the privatisation of British Gas, British Steel, British Coal and the regional electricity and water boards, demonstrated so admirably.

That's a mind-blowingly fitting tribute to the lady and her legacy.  No one can accuse the British of not doing the right thing by their leaders.  

"DMRCL Favours Govt Agency for Metro Phase II"

DMRCL Favours Govt Agency for Metro Phase II.

It's all a bit mysterious indeed.

"Privatization Nightmare: 5 Public Services That Should Never Be Handed Over to Greedy Corporations"

Link.

To read, soon.

'Blind Faith In Private Health'

Krugman.

So what lies behind the Republican obsession with privatization and voucherization? Ideology, of course. It’s literally a fundamental article of faith in the G.O.P. that the private sector is always better than the government, and no amount of evidence can shake that credo. 

The same ideology thrives here too.

Thousands march in student protest over university fees: BBC

Link.

Some 4,000 officers are on duty, as demonstrators march peacefully in a protest against higher tuition fees and "privatisation" in universities.
...
The student protest, organised by the National Campaign Against Fees and Cuts, is against the government's plans for a market-driven higher education system and the rising tuition fees. 

"We are being told by a cabinet of millionaires that we will have to pay triple tuition fees," said campaign leader Michael Chessum.
...
Protesters carried placards which read "Scrap Tuition Fees" and "Free Education" and chanted "No ifs, no buts, no education cuts" and slogans criticising the police over rubber bullets.
..
Paul Clark, director of policy at Universities UK, which represents higher education institutions, says universities will not be damaged by increased competition. 

"I think that the level of private involvement in higher education at the moment is relatively small and is likely to remain that way for the forseeable future although we know there are plans to, to change this," he said.

So, where do we go with privatisation in India? 

Privatise Profits, Socialise Losses

It goes on.  Tepco to get $11bn government aid after plan approval.

Soaring Student Loans in the USA

As the calls for for-profit private education institutions get louder, here is one data point to take heed of: A 511% rise in student loans 1999 in the USA.

Obviously the number of students didn't grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government's backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.

And the state of for-profit colleges over there is uncovered here: For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices.

Discoms in More Trouble

More trouble brewing for power distribution firms. The two Reliance discoms in Delhi, along with other discoms in other states, seem to have defaulted on payments to the generation utilities.

Banks As Public Utilities

What We Can Learn from Germany: How Countries With Publicly Owned Banks Do Better Than America

Is Electricity Different?

[This was posted to Hasiru Usiru mailing list]

From Prayas' Of Rocks and Hard Places: A Critical Overview pf Recent Global Experience with Electricity Restructuring:Navroz K. Dubash and Daljit Singh: December-2005):

Physical Demands of the System: Is Electricity Different?

Proponents of electricity markets point to gains from restructuring in the airline industry, trucking, telecommunications and natural gas to support their cause [Malloy 2005], but electricity has several characteristics that make it stand out. Since electricity cannot be stored, demand must match production at any given moment in a manner that keeps voltage and frequency stable across the whole network [Joskow 2003a; Sioshansi and Hamlin 2004]. Sprawling transmission networks help achieve this task by providing scale over which to smooth supply and demand; network congestion reduces the efficiency of the network at performing this role. Moreover, the AC transmission network is like a gigantic commons, in which bilateral contracts between two parties can introduce externalities through loop flow effects [Joskow 2003a; Van Doren and Taylor 2004]. The balancing task is further complicated by slow supply responsiveness because generation capacity has a long lag time, and low system elasticity of demand because consumers tend not to be price responsive. Congestion in transmission networks can shrink the geographic scope for competition, exacerbating the problem of matching demand to supply. For several of these reasons, system reliability requires provision of "ancillary services" and complementary, and complex, markets for these services [Joskow 2003a; Lave, Apt, and Blumsack 2004].

On the generation end, the capacity mix matters to how electricity markets work. For example, in hydropower based systems, reservoir discharge along a river has to be coordinated to maximize production, which may result in dispatch quite inconsistent from the demands of market competition.

In brief, electricity systems are machine like in their nature. Under vertical integration, coordination is achieved through direct control, while electricity markets have to indirectly ensure technical coordination through economic relationships. Commenting on this challenge, U.S. deregulation guru Alfred Kahn, has observed "I am worried about the uniqueness of the electricity markets. I've always been uncertain about eliminating vertical integration. It may be one industry in which it works well" [quoted in Kahn 2001].

(All italics/emphasis mine)

Regards,
Dinesh.

Electricity reforms - an alternative approach

[This was mailed to Hasiru Usiru mailing list]

This Prayas report discusses reform of the electricity sector (i.e., "standard model" which is: unbundling utilities, preparation of unbundled entities for competition by management/ownership changes possibly full privatization, lowering entry barriers by liberalization, stronger regulation) with respect to India. All italics/emphasis mine.

Of Rocks and Hard Places: A Critical Overview pf Recent Global Experience with Electricity Restructuring:Navroz K. Dubash and Daljit Singh: December-2005)

On competition
Competition, albeit poorly understood and poorly defined, is well on its way to becoming the contemporary magic formula to a healthy power sector. The tone is set by the Electricity Act, 2003, the preamble of which states that "promoting competition" is an end in itself, or at least as a taken-for-granted means to a better electricity sector. The Act is written to enable, if not mandate, competition in electricity although it does also encompass several other types of reform measures in its ambit.
...
Editorials in the business newspapers are unanimous in urging adoption of competition; a recent sample from the Business Standard declares "… critical if India is to remain competitive … is that competition be introduced in the [electricity] sector" [Business Standard 2005]. Commenting tariff hikes and their subsequent roll-back in Delhi during the summer of 2005, one of only two states to have privatized distribution, news commentators confidently assert "…competition is the only alternative" [Karnik 2005] and "competition … must be allowed in residential areas" [Times of India 2005].
...
empirical evidence suggests that "aggressive but plausible" estimates of price savings from wholesale electricity competition are 10%, translating to retail price savings of about 5% [Wolak 2004]. By contrast, subsidy reform, loss reduction, and a host of other more prosaic improvements are likely to result in savings many times greater, with far fewer downside risks. From this perspective the preoccupation with electricity competition in India is somewhat perplexing.

...

An alternative approach for India
The Indian electricity sector is between a rock and a hard place. The recent past of state- led dysfunction offers few reasons for hope, and the future, at least in the form of the international model of restructuring and competition, promises more confusion and only uncertain success. Electricity market optimists declare the problems with the model can be fixed. Pessimists suggest that once all the fixes are in place, the costs may well outweigh the benefits, and price signals will have been considerably muddied. Both agree that electricity markets have been far more challenging to implement than anyone had earlier thought. In this context, organizing the sector around improved regulation becomes a viable alternative option. In reality the long-term choice for India is not the easy one between a discredited state-led past and a shining market future, but the far more difficult one between flawed regulation and imperfect competition.

For countries like India, there is a strong case for stepping back to look at specific national priorities, rather than examining every option only through the lens of a market- based structure, which in the case of India is anyway a distant and uncertain dream.

First, it would be wise to adopt a "no-regrets" strategy on reforms that goes beyond the wish list approach of the National Electricity Policy to more concrete and time bound steps. Debate over competition should not be a delaying tactic or hindrance toward progress on more prosaic and necessary reforms. Leading the list of "no-regrets" measures is certainly management improvements in the distribution sector, whether under public or private ownership. Closely related is the need to strengthen the ability of regulatory institutions, which have already improved transparency in the sector and are undoubtedly critical to ensuring distribution improvements. Again, even if competition is introduced in the future, investment in strong regulatory institutions will certainly not have been wasted. Similarly, investment in transmission upgrades will be beneficial irrespective of industry structure.

Second, the sector is currently trapped between the ephemeral promise of the invisible coordinating hand of the market, and the reality of weakened and uncertain planning institutions. In the short to medium term, more deliberate planning is inevitable, particularly for generation capacity. Indeed, one of the weaknesses of fully restructured markets has been inadequate incentives for generation. Open access for a small proportion of demand in India is unlikely, by itself, to result in the desired investment. Instead, there is a strong case for use of Integrated Resource Planning (IRP) techniques to ensure that low cost generation (or demand side) options are fully explored. Additionally, there is no reason why IRP cannot be mated to competitive bidding mechanisms to enhance efficiency. However, planning needs to go beyond the short term needs of the sector, to develop and embrace a cohesive long-term vision.

Third, a preoccupation with organized electricity markets and in particular the full standard model obscures a more productive discussion to be had on emergent new directions in electricity reform that stress hybrid approaches. For example, experience in major developing countries such as South Africa, China, and Brazil suggest that both the state and the private sector will continue to play a major role in electricity through mixed or hybrid structures.

...India would be better served by focusing on fundamental, if unexciting and challenging, basic management reforms in the sector, particularly at the distribution end. Under the right conditions, competition can be a tool to an end. It is unlikely to be a shortcut.

Regards,
Dinesh.

Brookings Institute/UTI Bank study on power distribution in India (2007)

[This was posted to Hasiru Usiru mailing list]
Apparently, Brookings Institution & UTI Bank did a study in July 2007, mainly concentrating on the distribution aspect (The Power Sector in India: An Inquiry into the Efficacy of the Reform Process). Here are two interesting observations from that study:

Following a series of policy interventions instituted after a default crisis in the power sector around 2000-01, the rot in the power sector has been stemmed. The financial situation of the sector has eased, and together with the improved fiscal position of states, the strain on the states' fiscal deficits has lessened. Deficits as a share of GDP have declined [note : the policy interventions were not necessarily moves towards privatization. They were steps like unbundling, revenue orientation, management changes etc].
....
While the data in the paper shows evidence of only a weak relationship between ownership and profitability, it is important to bear in mind that the more successful subset amongst the discoms which have been privatised (i.e., Delhi) is a relatively nascent experiment, which has still managed to outperform many of its more mature peer utilities, while having started from a more disadvantaged initial condition.

Their finding on privatization/profitability is interesting, even though they apparently were not able to resist giving a thumbs up to private players. I mean, the private discoms in Delhi got a clean balance sheet, loads of loans/subsidies [note: there is very little data on how much of the loans have been repayed etc], extremely low target loss %, a guaranteed return on equity of 16% - that is a disadvantaged position?!

Regards,
Dinesh.

Power sector reforms - global experience

[This was posted to Hasiru Usiru mailing list]
Prayas has reports on their site, laying out the experience of various regions/countries in the area of power sector reforms (http://www.prayaspune.org/peg/energy_pbl.php?cat_id=1&sub_cat_id=10&#links). They provide conclusions for each region/country. They look not only at distribution but the entire electricity sector from generation onwards. In fact they give much priority to generation (makes sense since generation cost is 70% or so of total power cost). I've extracted summary/conclusion parts of the reports below form the individual reports with links to the full reports.

ASEAN
---------------
In the mid-to-late 1990s, several ASEAN countries initiated wide-ranging programs to reform their electricity industries. Such reform, argued its proponents, would improve the productivity of the electricity industries, and attract much needed private investment. A review of these reform experiences suggests that there is a significant disparity between the expected and actual outcomes of reform. Explanations for this disparity [tend] to be narrow, industry-centric, and ideological. This is unhelpful as it obscures the real challenges confronting the electricity industries and precludes consideration of meaningful policy prescriptions. There is a need to develop a broader perspective on electricity reform. This paper is an attempt in that direction.

[From the Epilogue]
.... much of the underlying arguments for reform in the region are untenable. The planners in the ASEAN expected to achieve a rather diverse and sweeping range of objectives from reform - attracting foreign investment, providing mass electrification, improving affordability, developing capital markets, and ensuring economic prosperity. There does not appear to be any compelling logic behind these expectations. For example, how does one restructure the existing (below marginal cost) tariffs and achieve price reductions? There also appears to be a general lack of understanding about the differences between the means and ends of reform. The privatization of the industry and the introduction of full competition appear to have emerged as the ends in themselves rather than the means to achieve technical and economic efficiencies. Further, the technical characteristics (for example, capacity constraints, fragmented systems, technological backwardness) and, more importantly, the socio-political contexts (for example, rural settings, institutional weakness) in the region do not appear to be positively disposed to the creation and sustenance of fully competitive and privatized electricity markets. These reforms therefore are unlikely to yield desirable outcomes.

The remedy, this author argues, resides in acknowledging the importance of the regional socio-cultural context; discarding the existing puritanical approach to reform that sees the world in 'black' and 'white' only and does not recognize the 'grey' where the multitude of humanity lives and strives, on a day-to-day basis, to carve out a dignified existence; and developing institutions and policy prescriptions that accommodate the interest of the wider citizenry in a culturally sensitive, yet responsible, manner. (Italics mine)
(http://www.prayaspune.org/peg/publications/global_reform_asean_epw_066A09.pdf)


Latin American Countries & the Carribbean
-------------------------------------------------------------------------------------
The main proposition of this paper is that power sector reform has made significant progress to overcome problems that plagued the pre-reform sector in LAC. But it still faces significant challenges, some of which arise because of the technological features of electricity markets, while others arise because many LAC countries lack the institutional development and the human resources implicit in the adopted models. Gains from the reform have varied. Success of the reform should be measured with a pragmatic yardstick, weighing the desirable against the feasible.
...
Although the starting points and objectives were different, reforms in LAC followed the pioneering OECD countries. The possibility that OECD experience was dependent on context seems to have been given scant attention. Reform appears to have been based on ideology, which assumed that the market could be trusted to solve the problem. While some basic elements are essential, a cautious approach might have been to say that no universal model exists, and that success of sector reform depends upon the institutional setting and the timing of reform. Unless those tacit elements, crucial to success in the original, are replicated or replaced with local versions, and unless reforms are coherent across the economy, transferring a model out of context is a gamble. While blueprints, best practices, international codes and standards and harmonization may prove useful for some narrow technical issues, large-scale institutional development requires a process to discover local needs and capabilities. (http://www.prayaspune.org/peg/publications/global_reform_latin_epw_066A06.pdf)

The Norwegian experience
-------------------------------------------------------
[They talk very little about distribution in respect to the Norwegian experience. In any case, ownership was not changed in Norway. The State plays the dominant role].
(http://www.prayaspune.org/peg/publications/global_reform_norway_epw_066A04.pdf)

South Africa - From State to Market & Back Again
--------------------------------------------------------------------------------------------------
The "standard" model of power sector reform of the past decade—vertical and horizontal unbundling, wholesale and retail competition and privatisation—has, in effect, been abandoned by South Africa, and increasingly by many other developing countries. This does not mean that governments will accept inefficient utilities. There is a still a commitment to ensure improved performance by state-owned enterprises through appropriate governance and regulation. Capital constrained countries will also open up space for private investments – mostly within the framework of a "hybrid market" where the state utility remains dominant. What remains to be seen is whether the investment mistakes of the past can be obviated and whether security of supply can be achieved at an acceptable price.(http://www.prayaspune.org/peg/publications/global_reform_sa_epw_066A08.pdf)

United Kingdom
--------------------------------
There was little apparent need for reform in 1987. Service was reliable, prices were in line with European countries, the industry was profitable and investment needs could be readily financed. However, there were three strong non-sector objectives that influenced the decision: generation of government revenues; widening of share ownership; and breaking trade union power.
...
In 2003/04, the 'honeymoon' period for the privatised British electricity industry came to an end and the price reductions from 1987 onwards were almost wiped out in only a year. The good results up to 2002 were based on three factors:

• Good luck, particularly extremely advantageous fossil fuel markets;
• A significant improvement in the performance of the British nuclear power plants; and
• A transfer of resources from tax-payers to electricity consumers.

The criterion on which the reforms must be judged is whether efficient markets have been created. On this criterion, they have failed. The wholesale market is not competitive. Confidential contracts and self-dealing within integrated generator/retailers dominate wholesale purchases leaving the spot market with no liquidity
and unreliable prices. The failure to develop a competitive wholesale market places the onus on the retail consumers to force competition on the industry. Large consumers can do this and have done well from liberalisation. But, these gains have come at the expense of small consumers and, unless government strengthens regulation at the expense of markets, this exploitation will get worse. The industry is dangerously close to an oligopoly with a veneer of competition and there will be an increasing need for consumers to pay for the replacement of written off pre-privatisation assets at full price.
</quote> (http://www.prayaspune.org/peg/publications/global_reform_uk_epw_066A03.pdf)

United States of America
-------------------------------------------------
In the 1970s, the U.S. electric utility industry was faced with rising costs and sluggish demand. Efforts at lowering costs and revitalizing the industry through competition have largely been disappointing. Consumers have not seen prices fall, except where regulators have intervened. The merchant [generating] sector has suffered a financial crisis, hurting competition in both wholesale and retail markets. Advocates for deregulation assert that minor changes to market rules and regulations will yield the benefits promised. We argue that things are not so simple. Successful deregulation requires markets to be competitive and complete, neither of which is true in the U.S. Creating competitive markets is not impossible, but doing so imposes costs on the system which may outweigh the benefits of deregulation.

Policymakers in countries (particularly developing countries) considering a competitive electricity-market model should take a hard look at the challenges faced by the United States, and think carefully about the underlying goals of electric sector reform. In particular, will competition serve as an aid or impediment to achieving the stated goals? What costs would be involved in the transition to a competitive market structure? (http://www.prayaspune.org/peg/publications/global_reform_usa_epw_066A05.pdf)

India related lessons in the next two mails.

Rgds,
Dinesh.

Delhi power supply (cont'd)

[This was posted to Hasiru Usiru mailing]

Dear Mr Muralidhar, Thanks for your compliments & for taking my response for what it was meant to be, viz., an attempt to dig deeper into the whole issue and then to put out what I found so that those interested may in turn judge for themselves. I would be a pigmy among the biggies who (I assume) make up the KERC advisory panel currently. Better would be to have a public and transparent consultation before taking these decisions.

You mention that you want to omit Delhi's experience and only consider North Mumbai's experience when discussing Karnataka ESCOMs' privatization, on the grounds of comparing oranges to oranges and not oranges to apples. I'm sorry but that is just cherry picking the evidence to prove a point. I'm saying consider all the cases. The only conclusion then becomes that privatization/reforms is not a silver bullet and that everything depends on the context. The World Bank report I mentioned in an earlier mail (in the context of Rajasthan) says that, Prayas clearly says that, and a Brookings Institute study I'll quote in later mails says that. And the Delhi discoms were given sweet deals - they should be doing better. The govt stake is not a hindrance at all.

You say BEST is running losses & Reliance Infra is running profits. Compare the figures for 2007-08 in these two links: http://www.bestundertaking.com/finance0506.pdf and http://www.rel.co.in/Rel/newsmedia/RInfra_APR_FY_09.jsp . You'll find that the gap for BEST for that year is Rs 221 crores (lower than earlier year). Gap for Reliance Infra is Rs 550 crores. (note: Reliance consumer base is larger than BEST's). Where are the profit numbers? In fact, the last study I mention above finds no relation between ownership and profitability, very reluctantly I might add (link & excerpt in later mails).

Regulators are supposed to be independent. They could lean towards public discoms, but equally they can be won over by the private discoms.

It is heartening that one person, Mr Jairaj, made such a difference. If one person can do so much then the quest should be to retain such people and empower them. It would surprise me that he would advocate privatization when he has seen the improvements that are possible within the current setup. Indeed, he does not mention private distribution in this July 2009 interaction with Bangalore Chamber of Industry and Commerce: http://www.bcic.org.in/files/Interactive_Session_with_Mr_Jairaj.pdf.

I wouldn't mind putting it on Praja, in addition to HU. These mails have grown so huge that I'm not sure they would make sense there.

Regards,
Dinesh.

Delhi power supply (cont'd)

[this was posted to Hasiru Usiru mailing list]
Dear Mr Dinesh Kumar

My compliments to you on an excellent and fairly well researched analysis of the overall power scenario in the country, even if not quite complete. Like I had some time back suggested to HU to nominate Rohan D'Souza to be on the board of the LDA, I would now like to request HU to nominate you to the KERC advisory panel. I believe there's a vacancy there, and if HU members are agreed, I can, in fact, take the initiative in getting other civil society organisations in Bangalore to also pitch in. This is particularly significant in view of the impending privatisation of the Karnataka ESCOMS.

Very clearly, there's hardly any defence of the way the Delhi power distribution privatisation has been taken through. But, that doesn't mean that the idea of privatisation itself is bad. In fact, if I recall correctly, it was Mr Gajendra Haldea himself who was the prime mover of the idea, when he was in the government. And, the PRAYAS report, I had read some 5 years back, had many recommendations for the way Delhi should go, based on the learnings from the mistakes committed in Orissa. Apparently, neither PRAYAS nor Mr Haldea were consulted, but instead TATA Consultancy was engaged, even while one of its sister companies was very much in the picture as one of the major contenders for the job - crony capitalism in full play. The problem lies largely there. And, subsequently, in the powerful players getting a very pliable 'regulatory commission' put in place, quite as much as in California.

49% equity ownership is more than good enough to ensure a say in the goings on, and if the Delhi government has not used its position to prevent the misdeeds cited, it certainly is guilty. I wonder why the civil society, and the opposition parties have not made enough of a noise. Whether with a government service provider or a with a private one, if the people (civil society) are not vigilant, between the mafia's and the lobbies, they will indulge in their loot.

My stance on privatisation comes largely from this clear example - comparison of oranges against oranges, and not against apples, viz Bangalore power distribution vs North Mumbai power distribution. Bangalore has always been with the government servise provider - BESCOM, successor to the earlier KSEB. Mumbai North has from long been with BSES, which was taken over by Reliance, some ten years back. Resulting from it all, Bangalore today is a Rs 1500/- cr market for gensets, inverters, converters, batteries, emergency lamps, candles, etc, whereas these products hardly have a presence in the Mumbai market. There lies the difference. Whereas Mumbai enjoys quality power, we are suffering the incapacities of the government-owned BESCOM.

Admittedly, even South Mumbai is in a similar happy state as North Mumbai, even with the supply there being in the hands of the city-owned BEST. But, BEST is losing money heavily, whereas Reliance is making fair profits, the playing field being uniformly level for both the players, ensured by the MERC. Given the scenario, the Mumbai city administration is now under pressure to hand-over the distribution to another private player.

Another major factor is that the government has an important role to play as the regulator, besides that of the facilitator. If it's to play the role of a player in addition, it can never be effective or impartial in its more important roles.

Yes, BESCOM is doing better now, compared to a few years back. But, I would attribute this largely to one person - Mr K Jairaj, the current Principal Sec, Power, whose stature ensures that even the neta's generally listen to him. But, it's the same Mr Jairaj who is piloting the privatisation efforts in the state in full appreciation of the fact that that's the only sustainable way to ensuring efficiency. And, PRAYAS is very much on the advisory panel in Karnataka. All we need to do is to ensure that they are not side-lined at the last minute, and some interested party brought in.

And, lastly, for now, why don't you want to put these on PRAJA? Please understand that I am not the voice of PRAJA. There are more people who question my views there than here, and in a more studied way like you do. Besides, by putting it on PRAJA, there's perhaps a better chance of your views reaching the likes of Mr Jairaj himself - just my view; I may be wrong.

Muralidhar Rao

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.