Delhi Transco Ltd (DTL), which was born out of the Delhi Vidyut Board?s (DVB) unbundling in 2002 as part of the broader power sector reforms in Delhi, has managed high levels of operational efficiency, mainly through fresh investment in its transmission network. That was possible only because its revenue generation was robust. This contrasts with the financially alarming position of the DVB and underscores the success of the state’s power sector reform.
Power distribution companies like BSES Rajdhani and NDPL have significantly improved collection efficiency after they took over the service. Both have healthy cash flows to pay DTL for the power bought.
The peak demand met by DTL increased from 2879 MW in 2001-02 to 3626 MW in 2005-06. Energy supplied increased from 18729 MU in 2001-02 to 21184 MU in 2005-06. System availability was 97.71% in 2005-06. The company met the power transmission requirement of Delhi with proper operation, maintenance, and augmentation of its transmission network. Losses were considerably lower than other state transmission utilities.
After due diligence, the Delhi government in July 2007 decided to convert the existing loan into equity in favour of DTL. The government noted that the conversion would improve the balance sheet of the company, which can start its business of power transmission on a new slate. The Delhi government’s decision to convert the power reforms loan of Rs 3,452 crore into equity share capital acknowledges the fact that past losses of the company had been on account of the wide gap between the sale and purchase of power.
After the loan conversion, the company emerged financially strong, as evident from the positive net worth of Rs 32.62 crore as on March 31, 2008.
The stand taken by DTL was unprecedented as most state-governed transmission companies were making losses. Given the revenue constraints it was essential for the company to optimise its cost structure and operate at maximum efficiency to garner maximum sales. A professionally managed company would be able to borrow at competitive rates and go for technological advancement to compete and survive when the power market gets completely deregulated and driven by market forces.
From an entity in need of grant from government, DTL turned into a dividend- paying company post-restructuring. With three continuous years in profit and raising of capital through bonds (without government guarantee) for capital expansion, things are looking up for DTL.
Critical to this angle has been the telling contribution of discoms in Delhi, through their collaboration collection efficiency has shot up, while its substations are being modernised to further raise efficiency and cope with addition of extra capacity.
The company will have a high quality balance sheet to arrange capital for further expansion. Critical to DTL?s future performance will be operational efficiency, network availability and revenue flows from distribution companies.
The author is dean and professor of economics and energy at Management Development Institute, Gurgaon