Imperatives of privatisation of power distribution

Like you say, it must be load shedding, disguised as maintenance.

My cousin is in a fairly senior position with Reliance Power in Mumbai, and he tells me that most residents there have no idea of a genset, or even a voltage stabiliser. And, only for very critical applications do businesses go in for gensets and the like. And, the tariffs are very much comparable, with sufficient concessions for the low-end users.

If you go to the KERC web-site and click on 'reforms', the privatisation path is all very clearly spelt out there. However, the vested interests keep coming up with various ingeneous ways of blocking it. The way things are going, the biggest money spinner in Karnataka is the 'stand-by (soon to become mainstay) power' industry.

Muralidhar Rao

Yajamanre'

What you say may be true for well established operations. But, what about start-ups, and smaller scale operations, particularly in non-IT sectors? And, as the diesel prices go up, their survival itself will become in question.

Sri Aravind Limbavalli has been appointed the power minister. I had made a presentation to the FKCCI on the subject a few months back, which was fairly well received (though some of the genset mfr/agent members had knowing smiles on their faces). I would like to make the same before the minister. Shall we form another working group?

Muralidhar Rao

Yajamanre'

I am sure you agree captive power entails wasteful use of fuel - the smaller the capacity of the set, the higher the wastage. In the apartment complex I stay in, captive power fuel cost alone is working out to Rs 17/- per unit. We are trying to figure out if there has been any pilferage of fuel. Instituting another check is another work, and therefore an additional cost.

Besides, the space these contraptions occupy could otherwise have been put to far better use. Any and every building complex today, has this contraption very often right in front, and even with improved aesthetics and acoustics, it is still an eye/ ear sore. Mumbai is totally rid of these.

You can feed power into the grid only if your capacity is fairly large. Besides, the synchronisation job is tricky and equipment quite costly. So, only the big johnnies can get into it.

Good models for privatisation - yes, very much - Mumbai, Ahmedabad, Surat, Greater Noida, even Kolkata, where private players have been providing fairly decent services from ages. The latest to join the lot, of course, is New Delhi. Though, initially, it was moving slowly, largely because of sabotage by the vested interests, things are now beginning to fall in place in New Delhi, and the position should soon be as good as in Mumbai. Check out the report by PRAYAS of Pune at
http://prayaspune.org/peg...

PRAYAS, Pune is a fairly professional set up, and can help any state/ city if it wants to benefit from the Delhi privatisation learnings. Interestingly, the GoK had long ago decided on the distribution privatisation path, and the KERC (Karnataka Electricity Reforms Commission) has supposedly engaged the services of PRAYAS as an adviser also. But, implementation, based on the advice, is another matter altogether.

For the rural areas also, there are many successful models/ approaches available. Rajasthan's (initiated by Vasundara Raje Sindhia) is one. However, unless you separate urban and rural loads and tackle them differently, you cannot make progress. But, unfortunately, that's exactly the objective of a handful, but powerful lot who want to perpetuate their vested interests.

Enron was the biggest racket ever, but worked by the politicians themselves. I had myself opposed it tooth and nail. Whatever, that is generation. The imperatives are of privatisation of distribution.

Muralidhar Rao

Muralidhar Rao

The problem is mainly related to transmission and distribution and if it is not streamlined in Bangalore, where there is 80 per cent recovery, the entire system will collapse, he cautioned.

For the full text, click on:
http://www.expressbuzz.com/edition/story.aspx?Title=Moily+blames+govt+for+worsening+crisis&artid=PlQh8g4FSL0=&SectionID=7GUA38txp3s=&MainSectionID=fyV9T2jIa4A=&SectionName=zkvyRoWGpmWSxZV2TGM5XQ==&SEO=

Muralidhar Rao

NO MoU IMPLEMENTED: In 1990, the Central Government made drastic changes in its electricity policy and opened up power generation for the public entrepreneurs. Karnataka Government too had, since then, signed many memorandums of understanding. But, interestingly, none of them have been implemented.

From July 28, 1992 (in Boston, USA) to August 3, 1992 the then chief minister S Bangarappa signed 11 MoUs with different agencies to generate totally 5010 MW power. None of them have come up so far.

In 2001 during S MKrishna’s tenure a MoU was signed to generate 300 MW. Later H D Kumaraswamy, as chief minister and the energy minister signed a MoU to have a total power generation of 1040 MW. Both have not been implemented so far.

PRIVATE SECTOR In the same period from 1992, however, many private companies had installed their own power generation units. Total power generation from these four stations is 588.83 MW.

For the full report, click on:

http://www.expressbuzz.com/edition/story.aspx?Title=State+govt+to+buy+300+MW+power+from+Chhattisgarh&artid=ZEqRDMJe/MY=&SectionID=7GUA38txp3s=&MainSectionID=fyV9T2jIa4A=&SectionName=zkvyRoWGpmWSxZV2TGM5XQ==&SEO=

The reason is clear as daylight, but for those who want to see. Why would anybody want to invest huge monies and forever remain at the mercy of the monopoly government customer, namely KPTCL, who can pay you only in 11 months?   

Muralidhar Rao

Why is Karnataka experiencing more blackouts than any other state in the country? The Centre has figured out that unscheduled load shedding in the state is due to high rate of power pilferage. In fact, Karnataka comes next to Andhra Pradesh in power theft. Even as the government plans to provide 24-hour supply to industries, little has been done to plug power leakage.

According to figures compiled by the Centre and released recently, 45,982 cases have been booked by the state government for power theft in the last three years. In 2005-06, the government registered over 16,000 cases. There were 14,435 cases in 2006-07 and 14,841 in 2007-08. AP recorded a mammoth 5.91 lakh cases during same period, while the all-India figure for the last three years stands at 7.42 lakh cases.

"Electricity theft is one of the major factors impacting the financial health of power supply agencies, resulting in frequent load shedding and unscheduled outages. The financial health of power utilities is also a criteria for assessing the viability of new investment," the central report said.

Estimates have revealed that all-India `aggregate technical and commercial loss' is 30.56%, with power theft being the main reason for the loss. While Karnataka and AP have high rate of power theft cases, five states -- Himachal Pradesh, Manipur, Mehghalaya, Mizoram and Punjab -- recorded zero case. Tamil Nadu reported only 51 in the last three years.

For the full report in TOI, click here

The cooperative movement has touched even the power sector. In addition to power generation the cooperatives are performing a significant role in the distribution of power.

In the State 6 Rural Electrical Cooperative Societies are registered. Of which Rural Electrical Co-operative the Society, Hukkeri, was registered in 1969, and as on 31-12-2007 it has 67366 members, a share capital of Rs. 2.92crores (of which Government share is Rs. 41.70lakhs) and Rs.7324.39 lakhs as working capital. As on 31-12-2007 it has provided electricity to 107 villages, 15 hamlets and 14 rehabilitation centres.It is functioning as an alternative to KPTCL., in power distribution.

Source: http://sahakara.kar.gov.in/othersoc.html

I had talked about the Hukkeri society in my opening post too. But, from the exchanges I had with a senior official in BESCOM/ KPTCL, it appears they are doing everything possible to kill them in order to perpetuate their monopoly.

 

The power generating units are too old and are not able to meet the demand. This is what K Jairaj, principal secretary, energy department, has to say about the huge power shortage the state is facing. For the full report in the TOI, click here.

Now, doesn't that sound a bit strange? What does a business do when its equipment have become old and can't perform to the required capacity levels? Replace them, right! So, why isn't KPCL, the company that manages these generating stations, doing that? Very simply because they are forever cash-strapped, inspite of making reasonable book profits, a fact that Mr Jairaj can't quite afford to say, since otherwise he may find himself shunted out to some inconsequential post, possibly outside Bangalore. KPCL's near 'bankrupt' position is evident from the Current Ratio of its operations being at 5.27:1 (from its web-site).

The current ratio (from wikipedia) is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. A current ratio of assets to liabilities of 2:1 is usually considered to be acceptable (ie. your current assets are twice your current liabilities). If the current ratio is too high, then the company may not be efficiently using its current assets or its short-term financing facilities. This may also indicate problems in working capital management.

And, the reason for this is the incapacity of the ESCOMS to pay KPTCL, and in turn KPTCL's incapacity to pay KPCL. And, the ESCOMS incapacity results out of a majority of them being largely dependent on government subsidy, which never gets disbrused on time. As such, as long as all these operations, particularly distribution, remains with government agencies, there's no redemption. The irony of it all is that, even as this is the position on the ground today, the government is inviting more and more investment into the state. I can't quite understand why anybody would want to invest in the state when as key an infrastructure sector as power is in such a dismal state. And worse, there's no light at the end of the 'dark' tunnel, either.

Udupi Power Corporation Ltd (whose 1000 MW imported coal based thermal power plant is set to become operational soon) web-site states, amongst other things, that necessary Power Purchase Agreements (PPAs) have been made with the five Escoms/Discoms of Karnataka, to whom 90 per cent of the power is to be supplied, the PPAs being covered by a three-tier payment security consisting of Letter of Credit, Escrow and State Government guarantee.

When I made the earlier post, the full meaning of the above lines hadn't quite sunk into me properly. Now looking at it afresh, I can see that there is going to be a literal stampede of industrialists wanting to get in. But, given the existing scenario, how is the government proposing to manage the funds situation? The easiest way out for it would be to hold back the payments to KPCL further, which will essentially mean tightening of the noose around its neck, till it chokes. But, the damage of an otherwise fairly well run company can even become irreversible.

The question that arises here is, if the government can offer such terms to a private party, why can't it do the same for its own company? Isn't it plainly because of lack of accountability? When government didn't honour the commitments made to GMR, they just towed the plant away to Visakh, and Jindal Steel and others have taken them to court. KPCL alone is made to shoulder the burden, just because it's a government company. Is there a clearer case as to why the government needs to be distanced from the ownership of such companies?

Call it disinvestment, call it privatisation - whatever, that's the only survival route available for KPCL if it has to be saved from the reckless politicos. Otherwise, it's going to suffer the same fate as NGEF.
 

Interesting excerpts from a New Indian Express report (accessible here)

The KERC has asked the state government to pay the subsidy amount for free power starting January. The state government had filed a petition with the Commission stating that the Rs 3,428.36-crore subsidy to farmers was a “huge burden”. The petition had sought that the subsidy be treated as regulatory asset and be passed on to other consumers.

“MESCOM has been misusing the subsidy by presenting inflated figures. There is 500 million unit of exaggerated figure for irrigation pumpsets,” said Shridar Prabhu, energy sector advocate. “What is disheartening is that the regulatory commission has not even uttered a word on the matter.” He said the regulatory commission has the power to probe the matter, but did not do so.

There's no solution to the power problem as long as the management of subsidies remains a problem. At least, it can be isolated to the where it originates (ie in the rural areas), and handled differently. But, then it becomes difficult to camouflage thefts as losses (as MESCOM is allegedly doing), and so, the tamasha continues.  
 

Bescom managing director P Manivannan said: “We are not able to purchase hydel power because of the government order. We have no autonomy to choose the kind of power we purchase. Other Escoms, like Gescom and Hescom, are given hydel power which is cheaper as they are facing a financial problem. We have to purchase high-cost power.”

For the full report in the ToI, click here.

Essentially it means that if you manage your finances well, you will be penalised with a higher charge on your inputs. Why would any one bother to manage the finances well - except say a Mr Manivannan?

Well, as long as these entities remain with the government, such artificialities are inevitable, and the citizens will be forced to shoulder the extra burden. The answer plainly is privatisation.

With Bescom area facing a shortage of 500 to 600MW, the company has written to KERC seeking to purchase 27,000 million units of energy. But it says the cost of power has shot up with increase in demand. The power purchase cost during 6pm and 10pm has increased from Rs 4 to Rs 9 per unit on Wednesday. So Bescom says it is unable to purchase power at this prohibitive cost.
    
Bangalore City alone is facing a shortage of 500 to 600MW during peak hours every day. Bescom MD Mr Manivannan said they are were planning to make time-of-the-day tariff mandatory. “We have filed a petition before KERC. That would mean higher rate for power during peak hours and relatively lower rate for nonpeak hours. Besides, we are planning to make pre-paid meters compulsory,” he said

For the full report in the ToI, click here

With having to seek their permission for anything and everything, the Regulatory Commissions appear to be working more like controllers than regulators. What does not seem to be quite appreciated is that, due the built-in inflexibility, the consumers are having to resort to self generations at almost twice the tariff rate, for longer hours.

All in all, the entire power scenario in the country seems to be in a royal mess.

The power crisis unfolding in Karnataka is as much a consequence of developments that were beyond the pale of the authorities as it is of their acts of commission and omission.

For the full report in the ToI, click here.

What's missing in all of these debates, whether in the statements made by the neta-babu combo, or by the industry honchos, is the key element of the chronically unhealthy state of the sector's finances, epitomised by this report. Unless a solution can be found for that, it's crisis all the way and all through.

Well, here you have both adviser to the CM, Mr A Ravindra, and the KERC Chairman, Mr M R Srinivasa Murthy, both advocating privatisation of power distribution. In fact, the government had decided decades back that that is the way forward. So, what's anybody waiting for?

Currently, with Mr Manivannan at the helm, BESCOM services have improved considerably. But, BESCOM finances remain in the doldrums, and no Manivannan, or anybody, can do much about it - check this. The inevitable answer is privatisation - the earlier we implement it, the better for all concerned, more particularly the 'aam aadmi' - check here how Delhi has benefited from it.

Chief Minister Jagadish Shettar has instructed the Udupi Power Corporation Limited (UPCL) to resume power supply  to Bangalore Electricity Supply Company Limited (BESCOM) from Monday. UPCL had stopped power generation due to a delay in payment of its dues. This had resulted in unscheduled power cuts in eight districts coming under BESCOM, including Bangalore.

- - -  On stoppage power generation from UPCL, Shettar asked the authorities concerned to first resume power generation from Monday  and that all contentious issues such as payment would be decided by the government. The authorities “in  principle”  agreed to resume power generation from Monday, sources noted.

For the full report in the New Indian Express, click here.

This is the kind of attitude that has caused the power sector in the state to languish the way it has all these years, leading to greater and greater dependency on gensets. And, as long as the sector (particularly distribution) remains in the hands of government players, such financial indiscipline, and the resultant unhealthy state of the sector, will continue. Delhi government has shown the way out of this conundrum - check here. If the other states are serious about finding solutions to their unending power problems, the route is clear.

Speaking about the challenges faced by BESCOM, its Chief General Manager Ananda Naik said, “The infrastructure is old and has to be improved. There must also be 100 per cent redundancy, but both these will cost a lot of money and face issues like Right of Way.”

For the full report in the New Indian Express, click here.

The critical question is where is the money going to come from, with BESCOM being perennially broke, financial indiscipline being the order in this sector (check this). Privatisation of distribution is the only answer.

Chairman of the Karnataka Electricity Regulatory Commission (KERC) Sreenivasa Murthy on Friday urged electricity supply companies (ESCOMS) to interact regularly with their customers in order to prosper.

At a workshop on ‘electricity tariff determination’ held in the city by the Consumer Rights, Education and Awareness Trust, Murthy said that while “it is not a sin to be a public sector organisation’’, it is, if the organisation does not care for its consumers. A ‘take it or leave it’ attitude will not help ESCOMS to survive for long, he said. At the workshop, two research papers titled ‘Civil Society Participation in Electricity Governance’ and ‘Power supply in Bengaluru -  Facts and Gaps’ were also released. The papers investigate the source, planning, demand and shortfalls of power supply.

Murthy also urged electricity consumers to familiarise themselves with the basic process of problem resolution. “Customers should know the functioning of the utility and their rights. They must know whom to contact in case of a problem and must take part in regular consumer interaction meetings,” he said.

For the full report in the New Indian Express, click here.

Consumers have better things to do in life than go on participating in meetings with utilities and service providers. It is the job of a utility to provide the service that it has been entrusted with, diligently, and it is the job of the regulator (KERC) to ensure that. That's what they are all being paid for by the consumer. And, that's largely the case in Mumbai, Kolkata, Ahmedabad, Greater Noida, etc, and Delhi of recent (check this), in all of which places the utilities are run by private players.

It's in Bengaluru and other cities and towns (as also in villages) in Karnataka that the consumers remain at the mercy of the poor quality supplies by government-run utilities, and have to keep running after them to get them rectified. So, is there a sin being committed? If so, by whom?

When the solutions are as simple and staright-forward as that, questions need to be raised as to the need for all these so-called research papers, as also the funding for them. Perhaps, these are how sins get piled on.

When I brought up the matter of Delhi's improved power supply, at a public platform recently, some body in the audience responded with "when Mr Manivannan became the BESCOM MD, the operations had become smooth", in effect trying to convey the message that if you have the right person at the top, PSU's also can run smoothly. Yes, BESCOM's day-to-day operations had indeed become smoother then, and the effect of that continues even today, at least to some extent. But, with government perennially delaying release of subsidy (for supply to farmers) in thousands of crores and for months on end, BESCOM was forever broke, leading to Mr Manivannan having to resort to all kinds of financial juggleries just to keep the show going. As such, the question of system upgradation/ improvement never arose at all, that in turn leading to its own set of serious problems. That's more or less what he stated in his address to the FKCCI (check my post of 18/07/2011, scrolling up).

As compared to that, when the Reliance companies in Delhi threatened to cut off power supply, saying that the tariff levels allowed by DERC would prolong the clearance of the regulatory dues (of close to Rs 15,000 cr) to them, making it difficult for them to meet their dues to NTPC, not only did the DERC raise the tariff by 8%, but, of all people, Sri Arvind Kejriwal (as the CM of Delhi) wrote out a cheque in their favour for Rs 323 cr from out of the funds meant for the Municipal Corporation of Delhi, all in a matter of a month (check the ToI report here). Initially, of course, he resorted to some sabre rattling threatening to terminate the licenses of the Reliance companies. But, when the realities were placed before him, he had no option other than to face up to the task on hand, or incurr the wrath of Delhi-ites.

Similar is the scenario when KPTCL is required to buy power from private generating companies like Udupi Power Corpn, Jindal, GMR, etc (check my post of 2/06/10, scrolling up).

And, in stark contrast is how KPTCL treats its main source, viz the government-owned (but, generally well-run) KPCL (check here), which is paid on an average in 13.5 months. It's a miracle KPCL still survives.

Moral of the story - financial discipline in government organisations/ PSU's is a difficult (nay, impossible) ask, with the rare exceptions, of course.

Remedy - Follow the Delhi model and privatise distribution (check this).

On Monday, the Karnataka Electricity Regulatory Commission (KERC) will begin public hearings related to the tariff revision petitions filed by various Electricity Supply Companies (ESCOM). The entire process is expected to take 10 days after which the KERC will announce a tariff order sometime next month.

This year, ESCOMs are seeking a 66 paise hike in tariffs. In its previous order, the KERC had hiked rates by an average of 20 paise for domestic consumers last year when the ESCOMs had asked for a 70 paise hike. This year, according to officials, more than 2,700 objections have been received from members of the public against the tariff revision petition.

For the full report in the New Indian Express, click here.

Of the 2700 'objectors', I expect, over 99% will be from RWA's and some Civil Society organisations, who have no idea of the difference between a kw and a kwh. Their objections will be largely based on some generalities.

Now, if you open the KERC website, under "reform efforts", sub-para "preamble", you will notice that the government had committed to 'privatisation of distribution', as far back as in 1997. It reiterated the intent a few years down the line too. But, nothing has happened since then, even though the main reasons for adopting the stance have only got buttressed further. Now, besides, you have the excellent model before us of Delhi (check here), where privatisation, over the past 9 odd years of the Sheela Dikshit government, has made a world of difference to all the stake-holders involved. As such, do the rest of the 'knowledgeable objectors' want to ask the KERC as to when it is going to press the government to move on privatisation?

Also, even if there have been the tariff increases, because of the 99.9% system reliability, leading to lower dependence on standby equipment, the net costs have come down hugely. And, for all of that, the tariff levels are still comparable to what is charged by BESCOM (for the far lower system reliability).

Apart from all of these, tariff increases are inevitable with input cost increases. Keeping a check on them is a highly technical job. It's best left to be done by the KERC, where the knowledgeable objectors (and may be a few of the not-so-knowledgeable ones too) can perhaps be represented (and, not just for raising objections). These 2700 objections are essentially a lobby exercise - best given up.
 

In a surprise move, the State government has told the High Court that it is revoking its order dated March 26, 2014—which mandated private players to sell all the power generated by them only to the State grid—as the “emergency” has ceased to exist and there is “surplus plus” power in Karnataka.

The government had issued the order under Section 11 of the Electricity Act, 2003, saying there was power shortage in Karnataka and hence private co-generation units (sugar companies) and other players must sell the entire power generated by them only to the State grid.

For the full text of the report in the Deccan Herald, click here

"Karnataka a surplus power state" now - does anybody want to believe that?

So, what is my friend Mr Sanjay V talking about when he makes the following post on Facebook:

BESCOM is at it again. No power since 3:30pm. This ordeal started April 21st. Very, very disappointed. Time to push the government out of the electricity supply business. Some excuse everyday from 22,23,25 and 26 were for some KPTCL transformer change. Since then there is some reason everyday. Long cuts, or multiple cuts in a day. I have logged multiple complaints on 22873333. Tired of doing it and the call center execs are embarrassed. If there is major system change, Bescom owes it's consumers an explanation. Food goes bad in the fridge. Chores cannot be done. As a large apartment, we have to buy diesel to at least keep STP and lifts running. I went to a nearby house in AECS layout. They were doing some renovation work in their house and lack of power killed it. Everybody is prepared for some power cuts. But what we are facing is not power cut. Power going off 4 times a day for 2 hours each or 6-7 hours at one go is not power cut in Urban India. Rural is a different nightmare.

Perhaps, the problem then is not with the power availability, but with the distribution system. Yes, indeed there is a very serious problem there of funds crunch, as repeatedly brought up by the erstwhile MD, Mr Manivannan, as also the Chief General Manager, Mr Ananda Naik (not sure if he is still holding the post), largely on account of "uncleared power subsidy to farmers to the tune of Rs 4,000 cr (read my post of 28th July, '10, by scrolling above - the situation remains more or less the same today too)", apart from non-payment of bills by other government organisations. So much so, the ESCOMS are hard put to carry on their day to day maintenance, leave alone upgradation, modernisation or expansion.

What Sanjay V has stated on Facebook is a clear manifestation of this. The answer to this plainly is good financial discipline, which cannot be practiced in government organisations, due to political considerations, but which private operators have shown themselves eminently capable of (check my post of 27th March, scrolling above, how Delhi private players are managing it). The imperatives of privatisation of distribution thus get further substantiated, if anyone is not convinced yet.

The Karnataka government had earlier invoked Section 11 to force the IPP's in the state to supply power to KPTCL because of the incapacity of the prime supplier, viz KPCL, which situation was brought about by the government itself - largely because of non-payment of dues (check my post of 2nd June,'10, scrolling above, for more on that). The payment terms being unsatisfactory, the IPP's, very correctly, challenged the order in the court.

Now, it's not as if KPCL's position is any better today, the dues to it from KPTCL being as huge as ever, and, consequently, the "power surplus" statement by the government is a plain bluff. The difference today is that you have an "industry-friendly" power minister, who is OK with generation companies like Udupi Power mucking up the environment in verdant South Canara to supply power to industrial consumers outside the state, even as Sanjay's in Bangalore (and worse, even the ones in Udupi) are told all kinds of cock & bull stories.

The minister had apparently been friendly to Sanjay too till after he had cast his vote. Now, perhaps it's time to recoup the election expenses.


 

Citing an increase in the cost of service for ESCOMS at Rs 2,231 crore for providing power in 2012-13, KERC noted that KPCL was a ‘major contributor’ to a shortfall in procurement of 6,908 Million Units which the utilities then had to buy on the short term market at a cost of 4.64 Rs/unit as against the rate of 1.94 Rs/unit that KPCL supplies power at. This coupled with a low revenue realisation of 19 paise per unit led to a gap of Rs 2,377 crore, KERC has estimated and a part of which has been incorporated in Monday’s hike.

For the full text of the report in the New Indian Express, click here. And, following are the excerpts from another article in the same daily on the same day (for the full text of that, click here)

“The subsidy the government will have to pay to cover the cost of power supply to irrigation pump sets and other consumers has increased to Rs 6,308 crore for 2014-15. An additional subsidy of `965 crore will be given to the Escoms for extra power supplied in 2012-13,” Murthy (KERC Chairman) said.

"Revenue realisation of 19 paise per unit" translates to 4.25%, assuming average billing rate is Rs 4 per unit. This means that if BESCOM's gross annual billing is Rs 10,000 cr, it is realising just Rs 425 cr, the rest of it going to cover the losses, apart from adding to the already whopping figure of Rs 6,308 cr subsidy dues from the government, as also the corresponding dues figures pertaining to other government organisations. This in turn has meant the debtors-days (no of days taken for realising your dues) figure for KPCL, the main source for all the state ESCOMS, mounting to 402 (13 and a half months), even as of 09-10 (check here), which will soon be touching 2 years, going by the way things have deteriorated steadily thereafter. In such a scenario, it's miracle that KPCL is even operating, and not closed down yet.

There is no escaping from this kind of a financial indiscipline, and the disastrous cascading effect thereof on the entire sector as also the economy, as long as the operations, particularly distribution, remain with the PSU's. A glimpse of how the private sector does it differently can be seen by a reading of my post of the 27th March (scroll up).

The KERC Chairman's making KPCL a scapegoat to pin the blame on, is a pathetic effort at transferring the blame from the government, where though it squarely rests, since apparently he can't afford to displease the powers that be that appointed him to the post.

The Supreme Court has told India's top power producer that it can cut supplies to an electricity distributor in New Delhi if it is not paid arrears by end-May, intensifying a dispute that could lead to blackouts in the capital. The court on Tuesday ordered BSES — part of billionaire Anil Ambani's Reliance Infrastructure Ltd — to pay state-run NTPC the 7 billion rupees ($116 million) it is owed by May 31. If BSES fails to pay by the end of May, the court said NTPC is entitled to cut the power it supplies to the distributor, overturning an earlier court order that NTPC should keep power flowing despite the outstanding bill.

For the full text of the report in the ToI, click here.

While that's the case in Delhi, BESCOM and its sister ESCOMS put together were paying its main supplier, viz government-owned KPCL, in 402 days on an average (ie almost 13 and a half months later), against the Rs 417 cr that it billed on an average every month (09-10 figures). The best debtor was BESCOM paying in almost 4 months, and the worst was GESCOM paying in 20 odd months. The gross debtor-days figure worsened from 295 in 07-08 to 339 in 08-09 to 402 in 09-10 (see my 1st post of 1st June,'10 - scroll up). I expect it will be far worse today, what with the dole-raaj let loose by the current regime.

Under the circumstances, what is surprising is that KPCL is even surviving, leave alone the question of meeting the state's demand. For all of that, the irony is that the KERC has chosen to find fault with KPCL (see my 1st post of 15th May - scroll up).

This bit about "overturning an earlier court order that NTPC should keep power flowing despite the outstanding bill" is quite significant. The earlier order was possibly passed when the government-run DESU was in charge of distribution. Very obviously, the courts too were being politically correct, and showed reluctance to punish the government-run utility. But, when the function has switched to private hands, apparently there is no longer the "political correctness" consideration, and they are happy to help enforce the contract terms, and thereby bring about the much needed financial discipline in the sector. This I would then add as another major reason why privatisation (particularly of distribution) should happen right away.

And, that's the only way to save an otherwise well run KPCL, since, totally unmindful of its plight, namma Energy Minister, Sri D K Shivakumar-avaru, is going about signing fresh MoU's for power purchases, going by this report in the New Indian Express. What sanctity can these Mou's have?

The high court on Thursday ordered notice to BBMP and the Karnataka Electricity Regulatory Commission (KERC) after a family filed a petition seeking Rs 29 crore-plus compensation from Bescom for the death of its sole breadwinner.

Observing that the case on hand is an 'eye-opener' , Justice Ram Mohan Reddy wanted to know why the Bescom couldn't do away with these transformers. One such faulty transformer was allegedly responsible for the death of Manoj Kumar Vasanthrao Patil, vice-president , Sundaram Auto Components, Hosur.

"The right of pedestrians is in peril because of these transformers. Can you not put an end to this pernicious practice ? Recently, I was in Paris for about a week. There I couldn't see a single transformer in any of the gallis (street corner). Why can't you adopt the same here?" the judge asked.

Bescom's counsel said the agency has taken many initiatives and will place them before the court by the next date of hearing.

For the full report in the ToI, click here.

Very much, as Justice Reddy has said, transformers and allied electrical equipment, are installed underground in most modern cities. Examples of various types of installations are accessible here. But, the problem is the much higher cost, and, with BESCOM being forever broke, due to large uncleared farm subsidy dues from government, it is hard put to carry on normal day-to-day operations even, leave alone the question of modernisation.

Now, even if installed above ground (as in Bangalore), as long as the equipment are of good quality, installed properly, and maintained well, they should not generally pose any serious problems. But, that's where the bigger problem lies. Very much like most other monopoly government set-ups, BESCOM too is lax on these matters, and you have incidents like the one the court is now seized of. And, being a government set-up, from which maamools (not necessarily small, as the term implies) cannot be extracted, the Electrical Inspectorate doesn't bother with the periodical inspections, which they carry out diligently in the case of private installations.

And, these are not isolated incidents. There was a similar mishap in mid-April in Koramangala - check my post of 14th April, scrolling above. And, it can happen again, anytime, and you and I can be the victims too.

Very plainly, government set-ups are no longer in a position to discharge these functions in today's world. It's high time they are all privatised.  Justice Reddy has talked about the case being an "eye-opener". One hopes the vision too becomes clear with the opening of the eye.

The following are the excerpts from today's front page ToI news (in italics - for the full text, click here), and my response to them:

Karnataka is heading towards a grave energy crisis. Bangalore is likely to bear the brunt of it. A weak monsoon and widening supply-demand gap have raised the spectre of prolonged power cuts.

- - - The government's efforts to mitigate the situation are going nowhere. "To meet the demand, we have signed an agreement, both short- and medium-term, to purchase 2,000 MW of power. But due to corridor problems, we are now getting only 600 MW daily,'' the minister said.

Signing an agreement is one thing, and honouring it is another. Calling private generation companies 'blackmailers' (see my post of 17th June, scrolling above), when they cut off supplies due to non-payment, may appeal to the motley groups of pseudo-socialists that remain in the country. But, it's not going to get the minister, or his party anywhere. The next elections, whether of the city or the state, will make that fairly clear, particularly when many of the other states (more specifically, Gujarat) have addressed the key issue of "power subsidy to the farming sector" head-on, and the rest are poised to follow suit, even as Karnataka chooses to keep its head buried under the sand.

- - - According to Shivakumar, the reasons for the impending crisis are many: diversity in demand and supply; gap in the installed capacity and realization; transmission and distribution losses; over-dependence on hydel power; and theft. The loss, including transmission and distribution, is 19.75%.

He refuses to talk about the key problem of "power subsidy to the farming sector", which is what I meant when I stated "keep its head buried under the sand". And, as long as this approach continues, there's little hope for the state other than through throwing out this government at the next elections.

Karnataka's installed capacity from all sources, including the Centre's share, is 14,329 MW. The state produces 6,390 MW from hydel, thermal, solar and wind sources. Of this, the share of hydel energy is 3,652 MW.

The question is how much of it is available to you, when you can't gear yourselves up to pay up the bills.

- - - The minister said the situation would improve a lot once the 700-MW Bellary Thermal Power Station Unit-3 and the 1,600-MW Yarmarus project are completed this financial year.

A large part of the huge Raichur Thermal power plant capacity is currently idling for want of money to buy coal, as well as to carry out regular maintenance. So, even if these new plants are commissioned, using project funds, within months, they too will suffer the same fate as the older units.

Reproduced below are excerpts from a report in the New Indian Express (in italics), and my response to them. For the full text of the report, click here.

“Today, subsidy for farmers and other schemes in the electricity sector, which was Rs 1,800 crore in 2004-05, has reached around Rs 6,200 crore. There has been no energy audit till now and we need to know where the generated power is going,” he (the CM) said.

What is the point just mouthing this, and not doing anything about it, Sir?

Siddaramaiah also cautioned KPCL staff to pull up their socks and work towards ensuring all current projects functioned at maximum efficiency. - - - - Shivakumar also brought up the topic of dues owed to the generation company and said, "The dues have reached around Rs 12,000 crore  today. There are many bodies like ESCOMS, zilla and gram panchayats who owe KPCL money. If this money does not come in, how will we fund more projects? This has to be fixed,” he said.

When the dues mount to nearly twice the turnover, because of the government's doings, with what conviction can you caution the KPCL staff, Mr CM?

The total subsidy paid by the state government this year towards free supply of electricity to 22.75 lakh irrigation pumpsets and 29 lakh Bhagya Jyothi/Kuteera Jyothi households will be Rs 7,113 crore. Last year, the subsidy paid was Rs 6,308 crore. According to Karnataka Electricity Regulatory Commission (KERC), the estimated consumption by IP sets will be 17,522 million units (MU) and 319 MU by BJ/KJ consumers. Faced with rising subsidy amounts every year, the KERC has made it mandatory this year for Electricity Supply Companies (ESCOMs) to carry out an energy audit failing which 10 per cent of the subsidy amount would be withheld by the government.

For the full text of the report in the New Indian Express, click here.

The talk of holding back 10% of the subsidy amount is nothing but a sick joke, considering the fact that the quantum held back at any given time is already well above 50% of the dues (the figure I readily have, was Rs 3,922.63 crore, for 09-10 - it must be much more now). As a result, the ESCOMS have reached a near bankrupt state, with hardly any funds for day to day maintenance, leave alone expansion or upgradation. So much so, almost everyday, there's a report of an electrocution death, the latest being of a worker when he came into contact with the iron gate of a public toilet (check the report here in the New Indian Express - with his being an "outsider", the story has hardly received any public attention).

And, there's a simple way out - check here. But, the problem for the many Socialists (pseudo's - I'd like to add) is that the likes of TATA's will make money, even if it's after providing a far better, lot safer, and effectively cheaper service, all on a level playing field.

This Wednesday, India’s banks will add Rs 53,000 crore owed by seven state electricity boards to the long list of ‘bad’ and ‘going bad’ loans.

- - - Total installed capacity is 272,502 MW. Viability rests on use of capacity—typically investor expectations anchor plant load factor (PLF) at 80 per cent. The PLF or capacity usage for 2014-15 was only 65 per cent. Sub-par utilisation of capacity—leaving nearly 50,000 MW of capacity (worth $50 billion-plus) unutilised resulted in outages, lower returns for companies and stressed bank balance sheets.

Some have argued that perhaps demand is low. But this flies in the face of the following factoids: nearly 280 million people exist without access to electricity, at 900kWh per capita consumption is pitifully low. There is also the argument that capacity utilisation was hurt by availability of fuel. Truth is that capacity utilisation is hit by the practice of crony socialism —the divorce of cost economics from price economics—for votes.

Consider the business model. Nearly a fourth of the power consumed (ostensibly) by the agriculture sector yields roughly 8 per cent of the revenues. Free power culture has resulted in a no power regime. The middle class is being exhorted to surrender LPG subsidy. Why not make the big farmer pay? Industry consumes 30 per cent of the power and delivers 41 per cent of the revenues—the unusually high tariff eroding competitiveness.

Add to this the phenomenon of transmission and distribution losses —euphemism for leakage and theft, which accounts for 25 per cent of the power generated. Forget China (5.73 per cent), even Bangladesh has a lower T&D loss level at 10.28 per cent. In 2012-13, India lost Rs 1.05 lakh crore —Rs 287 crore/day—three times sum allocated for MGNREGS. In 2014-15, India produced nearly 94.94 billion units. Imagine not realising the value for a quarter of this—do the math, for roughly 23 billion units at Rs 5 per unit.

The business model is bust. State electricity boards owe banks a total of Rs 3,04,000 crore. Are they in a position to pay back? The answer lies in the profit loss statement of SEBs given to Parliament. Part estimates of losses—because only 42 of 55 utilities have reported data—of SEBs were Rs 76,869 crore for 2012, Rs 69,726 crore for 2013 and Rs 50,532 crore for 2014. The cumulative losses of SEBs stand at over Rs 3 lakh crore.

Unsurprisingly, there is much discussion about a revival which is really a bailout. The catalyst is really the fear of rising NPAs in the banking sector. Without doubt, political parties across states will campaign for funds to revive the bankrupt SEBs to enable them to sustain political rent.

- - - It is critical that this revival of SEBs furthers the cause of much-needed reforms. It is time to open up the electricity sector to competition and enable efficiency.

The Electricity Act needs to be amended— to make Power Purchase Agreements portable, to allow the entry of new players in distribution. Indians deserve choice, to be liberated from SEB monopoly.

- - - Power tariff must be based on costs. Subsidies should be budgeted for and paid by the state—not borne by SEBs and delivered directly.

India simply cannot sustain the pretend-and-extend variety of reforms. It is time to cry halt to this mega-watt rip-off.  

For the full text of the brilliant narrative on the current power scenario by Mr Shankkar Aiyar in the New Indian Express (emphasis added by me), click here.

I couldn't help but post a large part of the article, since it graphically describes the pitiful scenario in great detail. I would still recommend a reading of the full text for those who have specific interest in the subject.

Now, Karnataka is also amongst the states guilty of the charge of the mega-watt rip off. And, the irony of it all is that the government itself realised the unsustainability of the existing model, decades back, and charted out the distribution privatisation path on the KERC web-site (under'reforms'). However, the vested interests, headed by neta's themselves, kept coming up with various ingeneous ways of blocking it.

Most shamefully, the scenario continues even today.

We would purchase power from all available sources and from the Centre whenever other states surrender power,” Shivakumar said.

For the full text of the report in the New Indian Express, click here.

Actually, power is available in plenty, going by the following excerpts from an Economic Times report (accessible here - emphasis added by me):

There are no takers for all the generation capacity that is in place. There is demand but they don't have the money to pay for the power due to the health of the discoms (state distribution companies)," a senior government official told ET, adding that discoms across all states had incurred accumulated losses of Rs 2.51 lakh crore in 2012-13.

- - - India now has an installed power capacity of 158,000 MW with 30,000 MW more in the pipeline. Another 1,00,000 MW would be added from solar power over the next five years, as per the government's plans. "Who will buy all this power if discoms are unhealthy?" said another official aware of the presentation made to the Prime Minister by the NITI Aayog on May 2 where the issue was red-flagged.

- - - "Just six state discoms are not in the red - Karnataka, Gujarat, Punjab, West Bengal, Delhi and Sikkim and transmission and distribution sectors require an investment of Rs 3 lakh crore," said an official referring to the NITI Aayog presentation to the PM.

The question is of the ability of the Discoms to pay, including those in Karnataka, who, while showing profits on paper, are all dead broke, with the government owing each of them thousands of crores by way of farm subsidy.

The minister is plainly misleading us all. The only way out is full scale reforms - yes, privatisation of distribution, particulrly in cities, quite like on the Delhi model (check here) has to happen, and fast too, if we have to attain salvation from the vice-like grip of the mafia confederation, headed by the politicos.

A major reform must be privatization of discoms to ensure their professional management.

For the full text of the 'my opinion' column by Mr S L Rao, the first CERC of the country, in the ToI, click here. Accordingly, I have today started this on-line petition, addressed to the CM. I would like to request all Prajagalu to endorse the same, as also to propagate the message.

Mr S L Rao has also stated, in the column "Coastal power plants using imported coal must be built with maximum environmental safeguards". I wouldn't however like to endorse that view. The verdant West Coast is not the best of locations for setting up thermal power plants, however much 'environmental safeguards' you may want to incorporate. One Udupi Power Corporation damaging the environment is bad enough - we don't need more.

As much damaging as the setting up and operation of a thermal power plant in the verdant coastal belt is, is the drawing of HT power evacuation lines to the load centres in and around Bengaluru, through the thick evergreen forests, entailing felling of thousands of full grown trees. Not quite worth it from any angle, leave alone environmental.

The largely arid, and sparsely populated, Raichur/ Ballari belt, with fairly good rail connectivity to the coal belt, is ideal for thermal power plants. Replacing the age-old 210 MW, with 500 MW units, at Raichur, apart from adding a few more 500 MW units at both the locations, will enhance the capacity from the area to 5K to 6K MW, which, alongwith the central allocations, routed through Kolar, will be good enough to largely take care of the base load of the entire state.

But, for all of that, what is needed first and foremost is that the operating agency, viz KPCL, be paid all its dues, as also ensured timely payments in future, which can happen once the CM implements what is requested of him through the petition. There isn't any other conceivable option.

In the context of the repeat of the Nirbhaya incident in Bengaluru, when complaints arose about lack of street-lighting, the district-in-charge minister, Mr Ramalinga Reddy has been claiming that they are working fine - check this report in the New Indian Express.

But, the problem is that the street-lights can work only when there is uninterrupted power supply. However, that's not happening because of the incapacity of BESCOM, caused largely by the government holding back payments in tens of thousands of crores on the farm subsidy account. And, the only cure for it, as has been brought out clearly in this blog, is privatisation of distribution, more specifically in the cities. There's clearly no other way out.

The government will relent only when te citizens demand it. So, let's just do it - just endorse this petition.

I am currently touring Bihar, and villagers say that electricity is available for 12-18 hours a day. City-dwellers say they get electricity almost all day, but with intermittent outages.

For the full text of the blog by Sri S A Aiyer, in  te Sunday ToI, click here.

Well that's far better than the so-called tech capital of India, Namma Bengaluru.
 

The Bengaluru Electricity Supply Company has filed a petition before the Karnataka Electricity Regulatory Commission (KERC) to consider flat rates for its telescopic tariff plan, which means that the electricity bills are going to get bigger.

The new petition has been filed before KERC after the electricity company asked the regulatory body to consider a hike of 80 paise towards power tariff across consumers to mitigate its loses.

For the full text (emphasis added by me) of the report in the New Indian Express, click here.

This is even as generating companies are dropping their charges, which form over 80% of DISCOM input costs, going by the following excerpts from The Economic Times (for the full text of that report, click here):

NTPC has cut average cost of generating electricity from coal by 13.6 per cent in the last three months by slashing coal imports, saving consumers Rs 300 crore a month.

NTPC cut back on buying costlier imported coal as well as augmented domestic supplies to reduce fuel cost, chairman of the country's largest power generator AK Jha said.
 
"The measures taken have reduced average energy charges by 13.6 per cent from Rs 2.06 per unit in September to Rs 1.78 in December," he said. This has led to lower per unit cost to consumers. "Cost of purchase by state DISCOMS is lower by Rs 300 crore per month," he said.

Further, even as many states, including those rules by non-BJP parties have joined the Centre's Ujwal Discom Assurance Yojana (UDAY), going by the following excerpts from a news report in The Economic Times (for the full text of that report, click here)

Kerala, West Bengal, Uttar Pradesh, Bihar and Odisha are slated to join the Centre's Ujwal Discom Assurance Yojana (UDAY) scheme for revival of state electricity distribution utilities, coal and power minister Piyush Goyal said on Thursday.

Karnataka just refuses to.

Apparenently, the powers that be are happy with the status quo - well, for obvious reasons. They just dont want to solve the problems. And, mind you, the problems are huge. The full impact of it all will be known immediately after the Invest Karnataka jamboree on 3rd & 4th of Feb. One needn't be surprised by even 50% power cuts, and over 6 hrs of load shedding a day. Of course, in rural areas, it'll be far worse than it already is.

Considering all of that, the best bet for investment in the state will be in gen-set dealership (for manufacture, you need power). You can be assured of a good going for at least another decade.

During a public hearing on tariff revision on Friday, TV Mohandas Pai, vice-president of Bangalore Political Action Committee (BPAC), a non-profit advocacy group, suggested that the commission look into the possibilities of privatizing the electricity supply companies (ESCOMs) and decreasing cross subsidy component in the tariff structure.

“KERC is here to protect the consumer and not the inefficiency of the companies. The ESCOMs are owned by the government and because of the latter's poor performance, it is passing the burden of recovering losses to the consumers,“ he said.

For the full text of the report in the ToI, click here.

Say that loudly, Sir. There's no other way out of the total anarchy prevailing in the sector.

Urban and rural domestic power consumers will have to shell out 30-50 paise more per unit from April 1, translating to a hike of 9% on the overall bill.

The Karnataka Electricity Regulatory Commission (KERC) on Wednesday allowed one of the highest increases in recent times of 48 paise per unit, though electricity supply companies (Escoms) across the state had sought a 19.05% hike of Rs 1.02 per unit.

Blaming the Centre's order disallowing electricity supply companies from carrying forward their regulatory assets (previously-incurred losses in the nature of deferred expenditure) and the hike in cess on coal, KERC approved of the hike across categories of consumers, including those using irrigation pump sets and under the Bhagya Jyothi and Kuteera Jyothi schemes.

For the full text of the report (emphasis added by me) in the ToI, click here.

As compared to the talk of the supposed "hike in cess on coal", the following are the extracts from an Aam Aadmi party white paper on power supply (accessible here) - "the newly commissioned Reliance owned Sasan UMPP bagged coal blocks by bidding to supply power at Rs 1.196/ unit". And, that being 80% of Delhi Discom's input costs, is how AAP government got the Discoms to reduce the tariffs, after facilitating the switch to buying bulk power from Reliance (from the earlier arrangement with NTPC), by first ensuring timely cash-flow. As compared to that, the Karnataka government has added another Rs 1641 cr in one year (going by the extracts reproduced below from another ToI accessible here) to the already unsustainable existing farmer subsidy burden of Rs 6,500 cr odd.

"The KERC said: “The estimated subsidy the government must pay in 2016-17 for free supply of electricity to these 25.9 lakh IP sets and another 29 lakh under the Bhagya Jyothi and Kuteera Jyothi households is Rs 8,838 crore.“ For 2015-16, the government paid Rs 7,197 crore".

And, how can the Centre be blamed for disallowing the regulatory assets to be carried forward indefinitely?

The latter ToI report also stated as below:

The Karnataka Electricity Regulatory Commission on Wednesday ordered a GPS-based survey of all irrigation pumpsets in the state. These get free electricity through government subsidy .

“The government said there are 25.9 lakh IP sets in Karnataka. However, we believe many are non-functional and therefore we've ordered a survey to be completed in six months. Those which don't figure in the survey will not receive subsidy,“ KERC chairperson Shankarlinge Gowda said.

KERC in essence is calling the ESCOMs' bluff, of hiding its operational inefficiency under the farmers' 'panchhae'. But, of course, how can any ESCOM, or for that matter any organisation, function efficiently, when it is owed a colossal Rs 8,000 odd crores, equivalent of some ten months of its billings?

The need, and a desperate one at that, is financial discipline. And, that can come about only through privatisation of distribution, as has clearly been shown by the total transformation of the power supply scene in Delhi over the past decade or so.

And, as for rural loads, the supposed free power supply, in actuality, is residual supply when all other needs have been met, which is rare. This situation is adding considerably to the already desperate situation there, causing total abandonment of agriculture and large scale migration of the population to urban areas. The only way out is to bring in accountability, all through, and that can be best achieved through rural co-operatives. Hukeri in Belgaum provided a good model - all that's needed is strengthening of it.

While asserting that southern states have benefited from the increase in coal availability and helped them combat power shortage during drought, Goyal said: "Karnataka is a small exception because when power supply was offered to the state during such a situation, it refused to accept it."

However, the minister didn't say at what cost the power was offered to be sold to the state government.

Citing the fire accident at Sharavathi generating station in Shivamogga which exacerbated Karnataka's energy woes in March, Goyal explained: "After the incident, Union ministers DV Sadananda Gowda and Ananth Kumar proposed to supply 200 MW of power from the unallocated supply of the southern grid to the state, which was facing acute water shortage as well. Unfortunately, for reasons best known to it, the state government refused the offer."

For the full text of the report (emphasis added by me) in the ToI, click here.

Actually, there's enough capacity in Karnataka itself, with a healthy mix of thermal and hydro, even with the outage caused by the accident. But, a shortage situation has been artificially created and sustained to buy power from Udupi Power Corpn, and Jindal Power, through arrangements which perhaps Piyush-ji should ask Jaitley-ji to have them investigated into.

Piyush-ji has been tweeting availability of hundreds of mega-watts of power at a nominal Rs 2.50 odd on a daily basis, which I am sure is far lower than the purchase price from the Jindal and Udupi. If GoK wanted solutions, they would have grabbed it. But, they obviously have a different agenda !!!

Demand for spot power declined by 10% in May from the month-ago period despite rising temperatures, explaining the long blackouts as utilities preferred to shed load rather than buy more power even at low prices.

According to data from Indian Energy Exchange, the average daily trade stood at 95 MUs (million units), or 10% lower than 115 MUs traded in April when the weather was comparatively milder. Overall, 2,929 MUs were traded, 15% less than the 3,465 MUs traded in April.

- - - This bears out the theory that outages are being caused mainly due to the inability or unwillingness of states to buy more power for fear of running up further losses.

For the full text (emphasis added by me) of the report in the Economic Times, click here.

And, this power is available at less than Rs 2.50 per unit, which normally constitutes around 80% of a DISCOM's input costs. By that reckoning, the average distribution tariff should be Rs 3.125 per unit. As such, even as a DISCOM could have afforded to lower its tariff if availing the power on offer, BESCOM has, as of May, increased the tariff by another 50 paisa per unit, making it Rs 5.90 pu for consumption beyond 100 units, and Rs 6.90 pu for consumption beyond 200 units (normal household consumption range). The reason - well, you know - they have 'certain' obligations towards Udupi Power Corpn, and Jindal Power Corpn, who in turn apparently have obligations to certain 'parties' (check my post of 22nd May, scrolling above). For power traded in millions of units, it's a huge lot of money.

This is of course, when power is available. During outages, which is not at all uncommon, the cost (of stand-by power) goes up some 2.5 times that.

Normal price increases would have been acceptable to the citizens. But, should they be sitting quiet when all of these "deals" are causing to shoot up the costs even further?

After rolling out the power distribution reform plan, Ujwal Discom Assurance Yojana (UDAY), the NDA government wants to open up the power distribution and transmission sector for competition.

The amendments in the Electricity Act, 2003, would have enabling provisions to allow more than one player in power distribution, including private companies.

- - - In order to create a competitive market for retail buyers, open access will allow consumers of less than one Mw to choose their supplier. Power generators, too, will be allowed to sell their surplus outside a state. A senior government source said some of the state governments were opposed to the entry of multiple players. “As a beginning, we will introduce this in Bharatiya Janata Party (BJP)-ruled states,” the source said.

For the full text of the report in the Business Standard, click here.

Good move to introduce it in BJP-ruled states first. Perhaps, once the benefits become obvious, there'll be a clamour from consumers in other states to follow suit too.

Or, is that asking for too much? Since, even with all the gains by Delhi citizens, resulting out of privatisation of distribution, detailed out here, "Namma citizensu" seem content with BESCOM's far from dependable supply - strange irony for the first city in the country to be electrified.

There is surplus power in India, but the distribution of power must improve, said S D Dubey, Chairman, Central Electricity Authority, on Monday.

For the full text of the report in the New Indian Express, click here.

Well, we all know that; the solutions are also known. But, the government refuses to look at them, for reasons also quite known. Sadly, the people who should be demanding change, since it's they who are bearing the huge additional costs in the form of various taxes/ cesses, seem happy to carry on their lives dependent on gensets, etc, unmindful of the costs, since perhaps they want to be seen as politically correct.

So, all in all it's a conundrum, out of which, perhaps only a crisis scenario can get us out. The rains in the Cauvery catchment have been pretty poor this year, meaning the cheap hydel generation will be very much limited, and consequently, we'll have to depend largely on thermal power. So, do we continue to buy power from Jindal/ Udupi at the high rates they charge, for reasons that are also fairly well known, or accept Pyush-ji's offers (but of course on conditions on reforms that are in the interest of the people at large, but against the vested interests of a select few people)?

To be on the safer side, the department is contemplating short term power purchase from Maharashtra for 200 MW at Rs 3.87 per unit and also for 1,000 MW for a mid term power purchase at Rs 4.87 per unit from local sources.

For the full text of the report (emphasis added by me) in the New Indian Express, click here.

Simultaneously, as seen from the picture above, tweeted by Piyush Goyal-ji, any amount of power is available today from the central grid at Rs 2.18 per unit (or thereabouts). So, why is Karnataka buying at almost double the rates? If purchasing from the Central grid, BESCOM should be in a position to effect huge cost reductions, and thereby reduce the tariff to consumers too. Why is that not happening???

Isn't it time people raised this question, and loudly too?

The myth propagated by Namm Sarkara for the consumption of the aam janata is seen in the excerpts reproduced below (in italics - emphasis added by me) from a report in the ToI (for the full text, click here). The reality as observed by a discerning viewer is what is intersprsed in normal print.

A power shortage threat looms large over Karnataka, even as a chilly winter sets in. The dry spell is worrying the state government, which fears it may lead to a power crisis much before summer arrives.

- - - A contingency plan on the power situation was finalized by a high-level meeting held last week by chief minister Siddaramaiah and attended by energy minister DK Shiva Kumar. It envisaged meeting the exigency by purchasing power from power traders and other states.

From about six months, Piyush Goyal-ji has been tweeting, on almost a daily basis, the availability of any quantum of power a state/ utility may want. For instance, on 26th Sept, he offered 4307 MW @ Rs 2.18 pu (check my post of same date, scrolling above). Now, with power purchase cost forming about 80% of a DISCOM's overall costs, if BESCOM were to take up Piyush Goyal's offer, it should be able to sell power to the consumer at an average Rs 3.50 pu, even with allowing for a liberal 20% profit. However, as of May, BESCOM increased the tariff by another 50 paisa per unit, taking it Rs 5.90 pu for consumption beyond 100 units, and Rs 6.90 pu for consumption beyond 200 units (normal household consumption range). The reason - they are not buying from Piyush Goyal, since they have 'certain' obligations to fulfill towards Udupi Power Corpn, and Jindal Power Corpn, who in turn apparently have obligations to certain 'parties'. For power traded in millions of units, it's a huge lot of money. In the same post, I had also cited a newspaper clipping which read "the department is contemplating short term power purchase from Maharashtra for 200 MW at Rs 3.87 per unit and also for 1,000 MW for a mid term power purchase at Rs 4.87 per unit from local sources". Buying from local sources @ Rs 4.87 pu is obviously the obligation, as one understands it.

- - - A shortage of coal and water may make it worse as five of eight units at the Raichur station fell short of their production targets, due to shortage of water in the Krishna river last year.

There's no shortage of coal in the country, or water in the Krishna, as of this year. Coal India has been achieving record production ever since Piyush Goyal-ji came on the scene, and River Krishna was in spate during this monsoon due to record rainfall in its catchment.

However, the government is confident it will be able to meet the situation without any cuts, except in the case of rural areas even during summer.

Rural areas are plainly doomed.

P Ravi Kumar, additional chief secretary, department of energy, insisted industries would not be subjected to any cut and that seven-hour supply would be maintained at all costs to agriculture pumpsets.

Well, as of now, Karnataka, for its much envied resources, does not figure in the list of top 10 states in either industry-friendliness (check here), or farmer-friendliness (check here).

Sources said the government has issued instructions to the authorities to make arrangements to provide electricity for the maximum time, till the 2018 assembly elections.

Election-based short term planning.

The government also restricted independent power producers from selling power to other states.

That's a game going on; besides, the courts over-ruled the order when the government tried that the last time around.

The additional burden will eventually be passed on to the consumer through a tariff hike.

Well, there you are!!! Whereas, elsewhere in the country, the tariffs are dropping because of improved overall functioning of all facets of the power sector, since the induction of competent private players into the distribution function, as also the coming of Piyush Goyal-ji into the scene (check my post of 24th July, scrolling above), Namma Sarkara uses the private sector generation companies to milk the system, all at the cost of the consumer.

P Ravi Kumar, additional chief secretary, department of energy, said: "The state is set to become self-sufficient in the electricity sector after two new thermal plants at Ballari and Raichur are opened in one or two months.

Karnataka already has a good mix of thermal and hydel generation capacity. But, it's all been run to ground because of diversion of funds, as also plain embezzlement - check here

The government is aware of the power situation in summer and plans to purchase power only to safeguard the interests of the consumers. Buying power this time won't be a problem as our neighbouring states, including Telangana and Tamil Nadu, have surplus power and the state can buy it cheaply any time."

Power purchase is about the biggest money spinner for the neta's, and the present dispensation seems to have honed it to a fine art.

The only way out is privatisation of distribution, more or less in line with the Delhi model, as discussed here.

BESCOM and the other state ESCOMs have once again placed ads in the newspapers about proposed increases in tariffs, alongwith suggesting that objections, if any, be placed before the KERC.

While, time after time, various NGO's have been participating in the exercise, after making elaborate studies, I have been maintaining that there is no way the job of distribution, particularly in cities, can be managed efficiently by government agencies, and, as such, the same be made over to reputed private players, quite like New Delhi has done, over the past decade (check here; and there are cities like Mumbai, Ahmedabad, Surat, Kolkatta, etc, who have had it from long. Actually, if you open the KERC website, under "reform efforts", sub-para "preamble", you will notice that the Karnataka government itself had committed to 'privatisation of distribution', as far back as in 1997).

I had more or less said the same thing in April 2014 (scroll above to read); but, things have gotten only worse since then.

The problem essentially is that, as long as the job remains with government agencies, financial indiscpline (rather misappropriation) is inevitable. The extent to which things have degenerated is evidenced by the fact that, for a Gross income of Rs 9110 cr (against billings on ESCOMS/ KPCL, its only customers), reported by KPCL in its financials for the year ended 31/03/16 (figures extracted from KPCL web-site), the realisation during the year was a paltry Rs 7938.65 crores, the outstandings therewith peaking to Rs 13615.81 crores, ie 545 debtor-days (nearly one & half years). The irony of it all is that, even under these circumstances, KPCL was forced to issue a dividend cheque to the government for Rs 41.4 cr on its declared profit of Rs 182 cr. It is a surprise how RBI is not clamping down on KPCL's bankers.

Now, all of this is resulting largely out of diversion of funds meant to be paid by the government to the ESCOMs, against farmer subsidies, for other populist pursuits. The ESCOMs are then forced to pass on the burden to KPCL, this in turn leading to the entire sector, up and down the chain, being in total shambles. This then is resulting in cost escalations in multifarious ways, across the sector, which is ultimately passed on to the consumer. As such, mere tinkering with the tariff figures is not going to help any. What's required is total revamping of the sector, beginning with privatisation of distribution in cities - the Delhi model provides a viable template.

Now, a government behaving irresponsibly is passe, though of course not acceptable. And, knowing well, the populist compulsions on an elected government, was why the Karnataka Electricity Reform Act 1999 was enacted by the legislature, in the first place, and KERC set up in 1999, so as to transfer the Regulatory responsibilities from the Government to the Regulatory Commission. But, are we seeing KERC acting responsibly? Allowing for a KPCL carrying on with debtor-days figure of 545 points to the answer.

PS: Even as I make this post, I can hear the genset chugging away in our apartment complex basement. Over the recent past, power interruptions have been the order of the day, with genset operations aggregating to at least some 5 hours a day.

As a drought hit Karnataka heads towards a harsh summer, power minister D K Shivakumar has a soother for the residents. "There will be no power cuts in the coming months," he said on Friday .

The minister said the state accounted for a surplus power of up to 20%."This is the first time we have achieved surplus power generation," he said, pointing out that the present consumption was 195 mil lion units per day, while supply was in the range of 200-230 million units per day . But the big question is: How has Karnataka, which is largely dependent on hydel resources, become power surplus when it has been facing drought for six consecutive years?

According to energy department officials, dip in consumption by irrigation pumpsets has resulted in surplus power generation. Energy department officials attribute the phenomenon to a dip in consumption by irrigation pumpsets. "Farmers have not been able to access water for cultivation. Borewells are drying up. Irrigation pumpsets have not been working for several months now and as a result, the demand for power from the agriculture sector has come down." The officials are optimistic of tiding over the power crisis in the coming summer.

Speaking about the MoU with REC, Kumar said several projects, including strengthening of the transmission network, will be taken up at a cost of Rs 39,700 crore.

For the full text of the report (emphasis added by me) in the ToI, click here.

This, one must concede, is a most innovative outlook. And, apparently, his solution for the accursed farming/ rural community has to evolve out of the "strengthening of the transmission network at a cost of Rs 39,000 cr (no less)", under a supposed MoU with the REC.

The question to be asked is why would a REC want to help out a government that has shown total irresponsibility in the handling of the finances of its power sector stake-holders, more specifically in the form of the generating company, KPCL, made to shoulder debtor burden of one and half years (see my post of 17th Jan, scrolling above). Though the state too had supposedly signed an MoU with the centre to lessen the burden, under the UDAY scheme (check my post of 16th Feb, scrolling above), there is no evidence of any progress on the front, obviously since it imposes certain conditions towards ushering in a level of discipline in financial managenent, which apparently is anethama to the minister. So, all the talk of Rs 39,700 cr etc is plain bumkum, and things are going to get only worse for the farming/ rural community. And, it's not as if life for the city folk is going to get any better. In fact, the state as a whole is doomed to a near crisis scenario on the power front, even as there's surplus generation in the country.

Ironically, what the minister has stated willy-nilly points to where the solution may lie out of the present imbroglio - which is

a) isolate the rural/ agricultural load from the city load, and manage it through distributed generation (largely based on solar, wind, mini-hydro, bio-mass and such non-conventional resources), and supply through co-operatives like the state already has in Hukeri, or through franchisees, and

b) professionalise (meaning privatise) city distributuion, more or less like Delhi has done (check here)

But, all of that calls for genuine intent, which unfortunately is a big question mark.

I attended the KERC public hearing on power tariff revision, Monday morning. Having arrived a bit late, I got to add my name to the list of people wanting to make submissions, last, and consequently got my turn also last. In the process, I got to sit through almost the entire hearing, listening to views and submissions from consumer groups across the spectrum. My take-aways are as follows:

The biggest and most heart-warming, as far as I was concerned, was the submission by a 7-member Bharatiya Kisan Sangha farmer group (sporting their green scarves), led by a Dr Ranganath, stating in essence that they no longer cared for BESCOM's so-called free power, and demanding that they be supplied fully metered quality power. And, if the government chose to afford any subsidy to them, the same be routed to their individual bank accounts through Aadhaar. Not just that, he went on to state that the general talk was that the private sector was doing a far better overall job of power distribution, and as such, he suggested that the job be handed over to them.

This was like music to my ears, and when I got my chance, I asked the Commissioner if this was the first time that a farmer group had openly said so. The Commissioner, while acknowledging that it was indeed a very positive approach, and perhaps the first such stance from a farmer group in an open forum, didn't want to give it too much weightage and went on to express doubts as to whether it will have the backing of the many other farmer groups. Either way, that's enough for me to add to my tom-tomming of the case even more.

I went on to submit that, earlier, if you were to open the KERC website, under "reform efforts", sub-para "preamble", you would find mention of Karnataka government itself having committed to 'privatisation of distribution', as far back as in 1997. I asked as to why that was not seen now, and why is it that the KERC was not pursuing the matter, in spite of the far better performance recorded by private players in other cities. I submitted TataPDDL's turnaround data sheet (see below) in support of the same.

To Dr Ranganath's suggestion of the private sector being inducted into distribution, the Commissioner had responded asking if the farmer lot would be prepared to pay their level of billings too, implying that it would be much costlier. Dr Ranganath had responded positively. Adding to Dr Ranganath's stance, I showed the Commissioner the tabulation I was carrying of the comparative tariffs in Mumbai and Delhi (see tabulation below), which clearly gave lie to the impression created that private sector players will necessarily charge higher. At 400 units cnosumption level (for domestic consumers), the charge in Mumbai is Rs 5.97 pu, whereas in Bengaluru, it's already Rs 6.90 pu, and there's the present proposal to increase it further.

And, an equally important factor is that, whereas in Mumbai, Delhi, etc, the "system reliability" is close to 100% (meaning you don't need gensets at all), in Bengaluru, it's far lower, meaning greater dependence on gen-sets, leading to aggregate cost levels becoming much higher.

The Commissioner tried to come to BESCOM's defence saying that the Mumbai and Delhi Discoms were able to achieve better levels of performance because they cater just to urban consumers, whereas BESCOM is catering to both urban and rural consumers. To my response that that's how it should be in Karnataka too, since the load characteristics between the two are totally different, and clubbing them together was only helping to hide inefficiencies (and racketeering too, I should have added), he readily acknowledged with a nod of acceptance, including the point that the rural loads were best addressed through distributive generation (largely solar, wind, mini-hydro, etc), with distribution handled through Co-op Societies, like in our own Hukeri.

I also raised the matter of the near financial anarchic situation prevailing in the state power sector, with government not clearing massive amounts of farmer subsidy to the ESCOMs, who in turn are not clearing their huge dues to KPCL, leading to KPCL's key financial indicators reading as below:

Total income - Rs 9110 cr; debtors - Rs 13,620 cr; debtor-months - 18 months
Share Capital - Rs 4,350 cr; Borrowings - Rs 20,303 cr; debt:equity ratio - 4.7:1

If not for this dismal scenario, KPCL has the capacity to meet the entire power needs of the state. As such, it's nothing short of criminal that the state is forced to buy power from elsewhere at exorbitant rates, even as KPCL is starved of its funds. This is adding tremendously to its costs, which ultimately is being passed on to the consumer. Obviously, there are vested interests at play, very much abetted by the state, whence the judiciary too becomes wary of intervening, as compared to its pro-activeness when the private players are involved, as happened in Delhi - check my post of 21-05-14, scrolling above.

Further, I went on to ask why, though there had appeared a report in Feb 2016 (check my post of 16th Feb, '16 - scrolling above) that Karnataka too had signed an MoU with the Centre to avail the low-cost funding, under the UDAY scheme, to clear the dues (largely farmer subsidy) to the ESCOMs, there doesn't seem to be any effect of that on BESCOM finances, yet. The Commissioner looked at the BESCOM officials, who just made some inaudible remarks, which makes me conclude that there has been no movement whatsoever there too.

Amongst the first to make its submissions was a team from B-PAC, led by Mr Mohandas Pai, who inter-alia dwelt largely on the matter of the so-called short term power purchases at exorbitant costs. More specifically, he appeared to be asking as to what rationale there was to the state buying power from Udupi Power Company at close to Rs 5/- pu, when on a daily basis Mr Piyush Goyal was tweeting Power Trading Corporation's offers for thousands of MWs of power at close to Rs 2/- pu (check my post of 23rd Sept, '16 - scrolling above). An exchange, at this stage, between the Commissioner and a young representative of Power Trading Corpn, about some commitment issue, went beyond my comprehension. Well, when Power Trading Corpn is making such offers, there obviously are some takers, and if power starved Karnataka is not one of them, but instead chooses to buy from Udupi Power at over double the rate, there needs to be some proper explanation. Mr Pai stated that he saw many things wrong there, and the KERC needs to take corrective action immediately. Overall, he stated that, even as the country today enjoys a power surplus situation, it is ironic that the state has to suffer poor quality power supply because of the incapacity of the many state players involved.

Many others made submissions pertaining to their specific areas. This included a representative from wind energy industry, based on whose submissions, it would appear that all the so-called incentives to them are largely just on paper.  

Very plainly, with the present scenario apparently suiting the vested interests of many, including within the government, very little change can be expected. Well, one had thought that's where the Regulator came in. But, for all of the Commissioner's nodding acceptance of almost every bit of the submissions I made, not having acted on them on his own so far, one wonders if there's any redemption for the state on the power (a key infrastructure) front, at all.

In such a scenario, can the citizens afford to just remain silent??? - particularly so, when there are enough cities in the country enjoying quality power - yes, supplied by private players.

Hi Deepak

The stark contrast between BESCOM performance as detailed by you, and Tata PDDL, Delhi (check my post of 22nd Feb, scrolling above - the salient features being System reliability - 99.68%; Mean time to repair faults 1 hr 53 min; Call centre performance - service level - 92%; Consumer satisfaction index - 84%) are there for all to see. In addition is the fact that the tariff at 400 units consumption level is lower by close to 15%. Yes, BESCOM tariff is slightly lower at lower consumption levels, but that's for much poorer quality supply, meaning large dependence on far costlier stand-by power, whereas in Delhi and Mumbai, you are more or less "gen-set mukt"

But, for all of that, it appears that Bengalureans are content suffering BESCOM (dis)services, going by the reaction of the people, I made a presentation to, yesterday. The P-word still continues to be politically incorrect, it appears, or what else can the reason be? For all of my analysis (check here), I haven't found the answers yet. And, mind you, this is even after farmer groups have come forward to openly demand metered quality power supplied by private players.

And, the KERC quietly removes the mention of privatisation from its web-site!!!

Talking of Manivannan, he had himself stated more or less that privatisation is the only way out (at least as far as power supply is concerened) - check my posts of 18-07-2011 and 17-06-2013 (scrolling above), as also the debate here, where he himself has posted enough comments.

Whatever, nothing is going to stop me from attempting to make Bengaluru too "gen-set mukt". Want to join me in furthering the matter, may be through a PIL?

About privatisation, I am not so sure, because we have seen Delhi cases, how private companies looted govt and consumers.

I don't know what "loot" you are talking about. Is it the matter of poor quality Chinese meters? Even if true, the scales are far lesser than what goes on today under BESCOM or any other govt run ESCOMs in most places across the country.

And, in the Delhi PPP model, the state govt holds 49% equity, meaning they have enough representation on the board, providing for all the necessary checks, apart from the role of the regulator. For all of that, it may still not be totally clean; but, far more so than what you have currently.

As for Ujjain, a state run ESCOM supplying power may be satisfactory. But, for a city like Bengaluru, that's supposed to be the tech capital of the country (and, perhaps emerging as a global leader too), we need 100% reliability, as well as constant upgrade of systems, which a state run utility is plainly not quite capable of managing.

• India has an installed power generation capacity of about 344.69 GW, with peak generation unlikely to cross 180 GW this year. Ironically, more than a third of the population of this power surplus country still lives without power. 
• The Centre claims to have already achieved 100% electrification in 99.93% of households with only about 0.07% remaining in Chhattisgarh.
• The states-run power distribution companies (discoms) have remained the highest loss making public entities in the country. Despite a massive financial restructuring under the Ujwal Discom Assurance Yojana (Uday), covering 97% of their total outstanding debt, discoms continue to incur significant losses. In the first half of FY 2018-19 they suffered a combined loss of Rs 15,080 crore, surpassing figures reported in the entire 2017-18 fiscal.
• Providing free electricity connections to 3.63 crore households under Saubhagya would raise discoms’ supply cost further by Rs 32,200 crore, thereby adding approximately Rs 3,800 crore to their annual losses.
• Lack of profitable returns disincentivises discoms to demand more electricity from power generators. Consequently, they fail to provide uninterrupted, quality power across large parts of India.
• Saubhagya has the opportunity to fast-track the reform process in the distribution sector by rationalising electricity tariffs without political interference and ensuring reduction of losses due to rampant power theft and collection inefficiency.