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Discoms should open up for competition: Sanjay Banga

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In a Q&A with Business Standard, Sanjay Banga, CEO, Tata Power-DDL dwells on the steps his company has taken to improve billing even as it has surplus power tied up

As power distribution reforms through UDAY come in for questioning by analysts, Tata Power Delhi, one of the three private power distribution companies in the national Capital, sees privatisation of processes, if not ownership, as the key to get over the cycle of loss and debt in the sector. In an interview with Jyoti Mukul & Shreya Jai, Sanjay Banga, the company’s chief executive officer, talks about the step they have taken to improve billing even as the company has surplus power tied up. Edited Excerpts:

What are your views on UDAY programme and has the performance of state-owned discoms improved?

In the last 3-4 years, the network has improved because of a lot of funding by the Centre. Also, power network has reached every house because of Saubhgaya and RAPDRP schemes. In terms of managing the discoms, the loss level is still high and operational and administration efficiency is low. Outages are still in days and transformer failure rate is 10-12 per cent, which adds to their loss. They need to improve resource capability, accountability and customer centric service. This requires private sector participation.

Even if they don’t privatise, the process should be privatised, and ownership can remain with the government. Eventually, this is a sector from where government should be out and left to the competitive players so that the consumer gets best service. Job of the government is to make regulations, governance structure and very strong regulatory system in place. Once you have that, then you should maximise efficiency by having a private partner in place.

How would you rate the distribution franchisee (DF) model against outright privatisation like in Delhi?

The Delhi model of public-private partnership is the best as you are accountable to the customers. The business model is similar to a transmission or generation project where you get fixed return on equity and balance is completely a pass-through to customers. Accountability helps in long-term planning. The DF model doesn’t encourage investment but helps in making money in short term.

If this sector has to sustain, it should open up for competition. It is the only sector where there is monopoly of states. It could be through the new policy of carriage and content separation or through the PPP model. The Centre can only guide in this. It is the state governments which should come up with clear reform process. There should be more than one player so that customer has a choice. He should pay the least cost than be burdened with the inefficiencies of the system.

How has been your experience with smart metering in parts of Delhi? Is it viable to introduce it?

The Central government has come out with a national tariff policy on smart metering and then UDAY scheme has also suggested smart metering is one of measures for discoms to improve efficiency. We asked the regulator to allow smart metering in Delhi and it also makes a solid business case for Tata Power since it helps in loss reduction, load forecasting and better analysis of theft.

My revenue is Rs 8,000 crore, so if I can increase revenue by 1 per cent or if I can decrease loss, then I can save Rs 80-100 crore. If the regulation that customers have to pay if there is a power cut for some hours is implemented then the exact outage time can be known only from smart meter.

You can also analyse consumer behaviour and demand pattern. That would help us make tariff more dynamic and meeting consumer requirement. The company plans to install 250,000 smart meters in the first phase of its advanced metering infrastructure (AMI) project in its licensed area of 510 sq. km in North and North-West Delhi by September 2019. We have set up entire communication infrastructure for that and have installed 70,000 meters. The total replacement and completion of 1.8 million smart meters will be completed by 2025. We don’t want to go in an aggressive way. As of now, we have reached a stage of stabilisation and now we will increase the rate of installation.

Will the expense on meters lead to an increase in tariffs?

It is through the capex model. The Delhi Electricity Regulatory Commission approves around Rs 400-500 crore to discoms for load growth, loss reduction and this is a part of the capex approval. Whatever is the expenditure in this will be recovered by other means. There is no change in tariff. In future it will help in reduction of tariff.

Is there any plan for prepaid meters?

We don’t have any such plan for Delhi. Our loss is less than 8 per cent. Such metres are more for rural areas.

Why has net metering not picked up in Delhi?

Solar rooftop generation is not much in Delhi. Power is in surplus besides there is space constraint which prevents solar penetration. We have 25 MW solar with net metering but it’s not even 0.2 per cent of my total consumption. The Delhi government has a plan to install solar on government buildings, so we will see that coming up in some years. RWAs have also been asked to install solar. We are also creating awareness but there is apprehension over initial cost.

How far have your plans on e-vehicles charging progressed?

We wanted to set up charging infrastructure since discoms are best placed to do that. The Delhi government’s policy though offers no incentive for discoms to install charging station. I will have to invest my own money. We requested the Delhi government if they can give us land for setting up EV charging infrastructure, as land is costly and not the infrastructure. Once the demand for EV comes in, tariff will go down. Also, Tata Power has surplus power which we eventually sell at exchanges for a loss per unit.

Are you seeking a tariff hike?

In Delhi, Rs 5.70 a unit is our average power purchase cost. The last tariff hike did not help reducing regulatory assets. Last year, the power purchase cost went by 12-13 per cent owing to change in price of coal and freight. Total regulatory assets are around Rs 4,000 crore. We want these regulatory assets to be liquidated. Currently, the government has surcharge of 8 per cent to liquidate. We want it to be liquidated in the next two to three years.

(Originally published in Business Standard)

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