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Model For Successful Private-Public Partnership In Discoms

A public-private partnership should be the preferred policy choice. Starting with the union territories will undoubtedly buttress the success already achieved through private collaboration and provide a fillip for other states to follow.

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For every 100 units of power, a distribution company (discom) sells, it receives revenue for 80. A significant part is stolen. A large chunk is lost during transmission over inferior networks that require technology upgradation. Rest aren’t billed. Undoubtedly, annual losses of Indian discoms are incredibly high and are rising at an alarming pace. 

AT&C (aggregate technical and commercial) losses for discoms vary between single digits for some, primarily private, and 40% for some.  Many power utilities are under extreme financial stress, and their power supply quality is below par. Their losses are likely to rise following subdued commercial and industrial power demand due to the onslaught of Coronavirus. 

The mismatch between power supplied vis-à-vis revenue collected can be corrected if the government initiates private sector partnerships for discoms. Finance Minister Nirmala Sitharaman, as part of the Aatmanirbhar Bharat initiatives, announced the government’s decision to invite private partnerships in public sector utilities in the union territories. This is a significant step in the right direction of achieving higher efficiency and lower losses. In September, the power ministry released a draft document with a similar intention for all states.

Private participation will create new management in discoms. To succeed, they must seamlessly marry their own culture with a vastly different tradition and work environment of a public sector utility. Integrate existing workforce with their inimitable experience and local knowhow. Undertake capex for upgradation of existing infrastructure to a world-class one. Discoms will have to be better managed and turned into a sustainable smart utility. The aim should be to supply stable and quality power at affordable rates and meet discerning consumers’ growing aspirations.

Easier said than done!

Unlike in the past, the government intends to infuse private participation in discoms as a whole, not its parts. It will create partnerships between state-owned and private sectors in the management of utilities. Workforce and assets of utilities will begin functioning under a new team of leaders. The leadership will have to regularly infuse funds to upgrade infrastructure, reduce losses, and improve power quality. 

Not surprisingly, the formal paperwork executing the deal for private partnerships into purely public sector utilities would be the easiest part of the process. 

Inclusive Transformation

A successful transformation will require a careful blend of decades of experience, the state-owned utility holds, with the new group’s modern management experience. The exercise should synergize years of wisdom of the utility with the new group’s energy and technology edge. It will require an infusion of the latest work culture and processes without separating any employees. A new management’s priority should be to retain workforce, experience, and talent. 

Smooth and successful unlocking of employees’ full potential — blue-collared, supervisory, and the utility’s leadership team, will have to be prioritized. Employees need to be empowered and updated with the latest in the field.  The transformation will be complete if the utility in its new avatar executes a strategy that infuses leadership qualities and retains its stability. 

Consumer Centricity

Consumers may be the last point for supply. They are still considered the most critical stakeholders in the whole spectrum of distribution, transmission, and generation. Along with supplying stable and quality power, reading all meters and correct billing is of utmost importance. Accurate billing requires 100% smart metering at consumer premises and on transformers. It will cut down losses, reduce tariffs, and make electricity affordable.

Regular investment in infrastructure 

Replacing existing standard meters with smart ones will be the one critical step towards accurate billing, which needs to be doubled up to improve operational efficiency in the entire revenue cycle management. It will reduce theft and help distribution utilities manage their system load efficiently. Efficient billing will lead to increased collections. 

Managements should invest in upgrading existing infrastructure into efficient and intelligent networks by implementing advanced metering infrastructure (AMI), SCADA, and IoT (Internet of Things). Presently, many utilities lack the resources and wherewithal to draw a strategic roadmap and undertake necessary investments in an integrated manner. Private participation will bring in much-needed funds and resilience to achieve the objective set out by the respective government as part of private partnership initiatives.

The final goal

We have an opportunity to think differently, transform distribution businesses into demand-driven organizations, operate professionally, and be the future power partner in progress, creating “good jobs” and boosting local opportunities for businesses and industries.

If utilities make necessary investments and achieve 100% bill collection, the sector will turn vibrant. The new management should be ready to provide essential tools required to transform the entity into a smart utility that distributes quality and reliable energy at affordable rates. 

The exercise will be successful only if the aim is to create a stable organization with a robust structure technically capable of handling advanced projects. It is advisable to make the new management make employees of the state-owned discom flag bearers of the smart utility for a successful makeover. 

A close look at all private utilities’ experience suggests these have successfully delivered quality power and improved customer service, especially in urban areas with a reasonable load following private collaboration.

A public-private partnership should be the preferred policy choice. Starting with the union territories will undoubtedly buttress the success already achieved through private collaboration and provide a fillip for other states to follow.

At India Power Corporation Ltd, we have successfully blended culture, experience, and the edge of a 90-year-old utility managed by the public sector for many decades into a new smart utility supplying stable power at economical rates throughout the year for several years. It is currently operating in a  multi-utility landscape. India Power is a true reflection of the enormous possibilities that such private collaboration in distribution utility could harness and make a difference for consumers.

It is no doubt an uphill task, but achievable if executed with precision.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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private-public partnerships discoms

Raghav Raj Kanoria

The author is Managing Director, India Power Corporation

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