Doing a volte-face on its power-sector reform agenda, the Uttar Pradesh government has dropped a plan to implement the franchise model for privatisation of electricity distribution in the state’s five cities.
Doing a volte-face on its power-sector reform agenda, the Uttar Pradesh government has dropped a plan to implement the franchise model for privatisation of electricity distribution in the state’s five cities, including capital Lucknow, and withdrew the tender documents inviting bids under the integrated service provider scheme (ISPS) for seven districts. Under ISPS, the idea was to hand over the work of electricity billing, meter installation and reading, revenue collection, etc, to private service providers to improve efficiency and reduce pilferage. The state government’s move, announced late on Thursday, came after a 20-day boycott of work by the employees of the state power department UPPCL in protest against the moves.The employees have called off the strike. The decision to put the reform plans in abeyance could cost the state’s power sector dear. The aggregate technical and commercial (AT&C) losses of the state’s five electricity distribution companies (discoms) stood at 30.9% at the end of December 2017, only marginally down from 32.4% when the state joined the central government’s Ujwal Discom Assurance Yojana (UDAY) scheme for the revival of the country’s debt-laden discoms.
As per the AT&C loss reduction trajectory charted by UDAY, UP’s FY18 losses should have been lower at 23.6%. According to analysts, the UP discoms’ AT&C losses are expected to rise further as more households are getting electrified under the Saubhagya (100% household electrification) scheme. The state discoms posted losses of Rs 21,486 crore in FY16. Their FY17 losses, on an unaudited basis, came down to Rs 6,619 crore and according to the UDAY portal, the losses in FY18 were at Rs 3,634 crore till December 2017. According to an agreement signed between the state’s principal secretary (energy) Alok Kumar and the employees’ representatives, UPCCL would not implement any privatisation without taking the workers into confidence. While the privatisation of power distribution was envisaged in the Electricity Act, 2003, progress has been slow so far. Apart from the national capital region, a few cities including Mumbai, Kolkata and Ajmer have private licensees running the distribution business while the franchise model is prevalent in most of Odisha and in a clutch of towns in other states like Asansol, Ajmer, Kota, Bikaner and Bhiwandi. As per the Uttar Pradesh government’s plan, the franchise model was to be introduced in Lucknow, Varanasi, Gorakhpur, Meerut and Moradabad and integrated service providers were to be appointed in the seven districts of Raebareli, Kannauj, Etawah, Orai, Mau, Ballia and Saharanpur. The state cabinet had approved these plans earlier. “The decision to privatise power distribution was arbitrary and therefore needed to be taken back. Engineers have been giving their best to improve power situation and curtail revenue losses,” said Shailendra Dubey, convener of UP Vidyut Karmachari Sangharsh Samiti.