Along with Swarup, industry experts Nikhil Nigania, Director and Senior Analyst at Bernstein; Mohit Bhargava, Senior Advisor-IECC at University of California, Berkeley and Former CEO of NTPC Green Energy, Sabyasachi Majumdar, Senior Director of Careedge Ratings shared their insights on the challenges and expectations surrounding India’s power distribution sector.
This is the verbatim transcript of the discussion.
Q: What would you expect if there is a policy on distribution?
Bhargava: A policy is expected, but we do not know because the government operates in its own way. India Energy and Climate Center (IECC) at the University of California, Berkeley, is helping the top government officials and policymakers to make decisions for economic growth and make it more sustainable. And in this, we have been supporting various departments, including, earlier, the coal ministry also, and we continue to do so.
Q: In your career, not just in coal secretary, but perhaps also in Uttar Pradesh, you would have seen unending problems in terms of distribution; they are not going away. If there is a policy, what will you expect?
Swarup: I hope there is no policy. We do not need policies now. We need an action plan. I remember meeting Prime Minister Modi in 2014 when the crisis was in both the coal and power sector. Unfortunately, the crisis in the power sector was not as recognised as the coal sector, but ultimately, they came up with the Ujwal DISCOM Assurance Yojana (UDAY), which was a very good policy.
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So, we must understand what is required in this country. It is not a set of policies and I hope they do not waste time on policies, because you will have a lot of time discussing those policies here ultimately, 10 years down the line, nothing would happen or not much would have happened.
So, what we need is a real action plan and in an action plan, we must understand if a thing is not happening, why is it not happening? We do not address those issues. What we discuss is policies, policies and policies. Even today, you will discuss policies, not going into the details of it.
Let me give you an example. The power sector has been by and large sorted out in Gujarat. Now, my question in 2015 and even now, is, why cannot the Rajasthan government sit with the Gujarat government and work out a clear-cut action plan? Because the terrain is similar in both states, we will end up discussing policies here. We will not discuss the action plan.
Since you called me, let me clarify. The objective of any discussion should be to move ahead. And my contention is very clear, we are trying to correct things sitting here in Delhi. We are sitting here and discussing policies in Delhi. The problem lies in the states. And if you compare why coal happened between 2014 and 2016, and power did not; the sun did not rise because everything was being done here in Delhi. What needs to be done is, go down to the states, sit with the states, understand the problem, and work out a clear-cut action plan, and I hope there is no waste of time in coming up with another policy.
Q: Do you think that something can come as part of the budget or along with the budget on distribution companies (DISCOMs)?
Bhargava: Distribution is a state subject. So, any news regarding the privatisation of DISCOM has to be at the state level. But one more thing is important that this has been established largely clearly, that privatisation or not, that is not the point.
The point is that there has to be accountability and responsibility at the DISCOM level, which, if I may add, Swarup mentioned about Gujarat, but we have seen now that happening in many other states. So many states have improved their losses significantly. They have come down dramatically. A couple of them are making profits also, and I am not talking about the private DISCOMs. It’s the government DISCOMs which are doing very well.
Q: If there is a policy and if it includes distribution, what will you expect, or what will you want?
Nigania: Distribution is the Achilles heel of the sector. Absolutely no doubt about that. I think everyone will agree to that. In terms of solution, it can be multifold. One, the Revamped Distribution Sector Scheme (RDSS) with the central government has run that continues as part of the next year’s budget, as well as those expenditures, to improve the health of DISCOMs that seems business as usual.
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The second is AT&C loss reduction, private DISCOMs, we have seen in cities and now Odisha is one good example where a private entity, Tata Power, is transforming the distribution business. It might not always happen, I agree, in the right direction, but at least till now, we have more cases in favour of private entities transforming DISCOMs for the better. And the UP instance, the two DISCOMs are being considered for privatisation should be a positive from a Discom health perspective as well, is what we feel.
From a policy standpoint, if you look at countries abroad, in many countries you have a multiple power retailer model. In India, for example, Mumbai is the only place where we have multiple distributors selling power. So, if you could have a competitive space in distribution as well, which is monopolistic in most parts of the country, except Mumbai, through multiple licenses, or segregating the line from the retail bit, that could help improve the health of the DISCOM.
Q: Is there anything else where a policy intervention is even needed?
Majumdar:, What we can expect from the budget is maybe something in the line of additional funding, continuing with the grant’s component for RDSS, or maybe some viability gap funding for various schemes like hydrogen or green hydrogen or nuclear etc.
But by and large, as Swarup points out, most of the action will have to happen at the state government level, beginning from the DISCOM site, because once the DISCOMs are financially viable, they can afford all kinds of solutions. For instance, the solutions that we have, like batteries or anything, all are expensive and it boils down to the fact that many of the DISCOMs do not have the financial muscle to use all these solutions to meet their power requirements on a 24/7 basis.
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