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Govt mulls privatisation for stressed, inefficient state-run power utilities: Sahai

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New Delhi: The government is considering asking inefficient state-run power utilities to go for privatisation and other institutional reforms to turn around operations and ensure reliable power supplies to consumers, Power Secretary Sanjeev Nandan Sahai said on Wednesday.

The government has been looking at privatisation of sick distribution companies as efforts to revive these utilities have failed to bear results. Resultantly, debts on distribution companies or discoms have been mounting over the last few years, threatening to blow up into a bigger crisis. These utilities lose money by selling power below costs, resulting in delayed payments to generators and depriving customers of reliable and affordable electricity.

The criteria for privatisation

In an interview to Bloomberg, Sahai said that states with electricity utilities that lose more than 15 percent of revenue due to archaic networks, power theft and sloppy billing and collections would be asked to seek private participation in their distribution network. The move would be part of the government’s second wave of power reforms, he added.

The state governments will have to do their part to ensure that companies succeed, Sahai said.

‘Enough private capital ready to invest in distribution’

“There is enough private capital ready to invest in distribution, provided states ensure a risk-free business,” he said. “States need to pay subsidies on time, government departments need to make timely payments of their electricity bills and political interference in operations needs to go,” he said.

The Power Secretary added that states can take a leaf out of the books of cities like Mumbai, New Delhi and Kolkata, and smaller towns, where private participation has led to a reduction in revenue losses and more viable operations. A deal that took place on the same lines last year took place between Tata Power and one of the distribution utilities in Odisha.

The next wave of power reforms

The next wave of reforms in the power sector, which are still in the pipeline, will follow an earlier set which was unveiled in 2015. The reforms were aimed at bringing down revenue losses to an average of 15 percent by March 2019. Even though the losses have declined, they continued to be at 18 percent at the end of the year through March, with many states showing bigger deficits. The combined net income losses in that year for utilities that signed up for the plan went up by 85 percent from the year-ago period to Rs 280.
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