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View: Modi has political capital to reform the

power sector Most Read Most Shared

Coronavirus has strengthened will for power reform but must be sustained to overcome Three Indian companies get licence to manufacture
political hurdles. NASA's coronavirus ventilators

By Swaminathan S Anklesaria Aiyar, TOI Contributor | Last Updated: May 31, 2020, 11.00 AM IST Save
Why should India eat Tommy Atkins when we have
our desi mangoes?
13
Comments Airtel terminates call centre services from Karvy for
alleged breach of rules, pact
New Modi_PTI Comyan 111 In Prime Minister Narendra Modi’s Rs 20-
PTI
Delhi-Moscow AI flight returns after pilot found
trillion package, power reforms are the most
COVID-19 positive
urgent. Electricity prices have long been political prices unrelated to costs, efficiency or
morality. For decades, chief ministers took kickbacks on power contracts and forced state Experimental COVID-19 test detects coronavirus in
10 minutes: Study
electricity boards (and, after the break-up of SEBs, the distribution companies or discoms)
More »
to sell electricity-free or at highly subsidised rates, to farmers and urban dwellers.

This aimed to win votes without providing the required subsidies from the budget, ruining
power systems across India. High industrial tariffs were used to subsidise farmers, but the
Top Trending Industry Terms
resultant costly electricity affected the competitiveness of Indian exports, a major problem When will hotels reopen in India? GST News RBI
today. Coronavirus mortality rate Coronavirus tests
Coronavirus vaccine Indian Railways news
Older reforms created electricity regulators to set fair tariffs, but they typically did the Indian Airlines news Telecom news Banking news

bidding of chief ministers. Discoms today have enormous accumulated losses of nearly Rs Finance news Auto News

1,00,000 crore and have massive arrears of payment to suppliers like Coal India NSE 5.53 %
, the Railways and equipment manufacturers. Aggregate Commercial and Transmission
(ACT) losses, no more than 6% in the best countries, exceeded 40% in India in the 2000s
since chief ministers gave no priority to efficiency or checking rampant theft. The Ujjwal
Discom Assurance Yojana of 2015 was supposed to induce the states to reform their
power sectors, check power theft, slash transmission and commercial losses, minimise
cross subsidies and restore the health of the discoms. Alas this did not happen.

Now, Modi’s Rs 20-trillion package allows the states additional borrowing of 2% of GDP,
subject to reforms of various sectors including power. To qualify, states must select
transmission and generation developers by competitive tender to cut corruption and
cronyism; privatise power distribution; improve billing and collection; and check theft. ACT
losses are down from a peak of 40% to 18% but must be slashed below 10%. Modi’s
Sowbhagya scheme, providing electricity to every household, is socially laudable but has
meant a huge expansion of the power network with little revenue, deepening commercial
losses.

It remains to be seen whether the new reforms will have more success than earlier
attempts, which were sabotaged by chief ministers. Modi badly needs reforms to
accelerate the economy and create jobs. His party also rules most states, including the
worst performers like Uttar Pradesh. He could give a new impetus to reforms.

My visit to Uttar Pradesh last January revealed imaginative political and bureaucratic
efforts but huge hurdles too. Sowbhagya provided an additional 12 million connections at
huge cost with little revenue. UP energy secretary Arvind Kumar sought to outsource the
collection of rural dues. He appointed village level franchisees — ration shopkeepers, bank
correspondents, self-help groups and co-operatives — to collect electricity dues for a fee,
pass them on to aggregators, and thence to the discoms. These shopkeepers were online,
making collection from them simple This was a promising start
making collection from them simple. This was a promising start.

Smart metering was unfeasible in rural areas for want of telecom. But smart metering had
been initiated in urban areas, enabling remote reading of meters and billing, with electronic
payments speeding collection. This also ended meter manipulation and enabled remote
disconnections of defaulters. Earlier local mobs would thwart officials from disconnecting
defaulters, and an acute police shortage meant thana help was unavailable. Pre-paid
electricity cards carrying a 2% discount have been offered to consumers, avoiding the
normal security deposit and possible harassment by collectors. Every step was incentive
compatible, a good practice.

Yet problems multiplied. Meter suppliers were scarce, quality was erratic, and shipments
delayed. Staff training took time. Checking electricity theft was vital to slash ACT losses.
Police thanas were too pre-occupied with major crimes to spare time for electricity theft.

Modi as CM of Gujarat had created one thana per district dedicated to power theft,
dramatically reducing theft. UP and other states are copying this. But they have long met
their fiscal targets by not filling vacant posts. In 2019, UP had 1.2 lakh police vacancies out
of 2.6 lakh sanctioned posts. Mass recruitment and training has begun to fill the posts, but
the police shortage will last a long time, and not enough newcomers can be spared for
dedicated power theft thanas. This may take one to two years.

The accumulated losses of the state discoms keep rising stridently. UP bureaucrats say
the only solution is privatisation of discoms, making them commercial and non-political.
The Modi package includes privatisation of discoms in Union Territories, and hopefully in
BJP-ruled states too. The coronavirus crisis has strengthened the political will for power
reform but must be sustained for several years to overcome the many practical difficulties
UP has revealed.

Read more on Narendra Modi Coal India The Ujjwal Discom Assurance Yojana

Prime Minister Of India State Electricity Boards BJP Smart Communications

Discoms

(Catch all the Business News, Breaking News Events and Latest News Updates on The
Economic Times.)

Comments (13) Add Your Comments

NEXT STORY

IndiGrid to Buy Kalpataru Power JV Asset

for Rs 310 crore Related Most Read Most Shared

IndiGrid aims to scale up its power transmission assets under management (AUM) to Rs IndiGrid completes acquisition of ENICL from
30,000 crore by 2022 and has plans to diversify into the solar power sector.This will be the Sterlite Power
second acquisition by IndiGrid from a company other than its original sponsor Sterlite IndiGrid Q4 results: Net profit doubles to Rs 99.7
Power. crore

By Rachita Prasad, ET Bureau | Last Updated: May 30, 2020, 05.15 PM IST IndiGrid to acquire Rs 1,020 cr-transmission project
from Sterlite Power
0
Comments
IndiGrid to acquire power transmission firm ENCIL
for Rs 1,020 crore
power. MUMBAI: Private equity firm KKR backed
Agencies

In May 2019, IndiGrid received investments from KKR infrastructure investment trust India Grid IndiGrid to raise Rs 7,500 crore debt in 18 months
and GIC, following which IndiGrid is managed by Sterlite to finance acquisitions
Trust, or IndiGrid, has signed an agreement
Investment Managers which is majority owned by KKR.
to acquire a power transmission asset at
Jhajjar in Haryana for Rs 310 crore from
current owners Kalpataru Power Transmission and Techno Electric & Engineering Top Trending Industry Terms
Company.
When will hotels reopen in India? GST News RBI
Coronavirus mortality rate Coronavirus tests
IndiGrid aims to scale up its power transmission assets under management (AUM) to Rs Coronavirus vaccine Indian Railways news
30,000 crore by 2022 and has plans to diversify into the solar power sector. Indian Airlines news Telecom news Banking news
Finance news Auto News
"This transaction is a major milestone and example of an accretive capital allocation
process that KPTL has employed over the past several years. We are also progressing
well on sale of other T&D assets and expect to close the same in FY21," Manish Mohnot,
managing firector and CEO, KPTL said.

An executive from IndiGrid executive, on the condition on anonymity told ET, "IndiGrid is
moving closer to the vision of having Rs 30,000 crore AUM. It already has Rs 18,000 crore
of assets in the pipeline and Rs 12,000 crore have been acquired already. Third-party
deals like these will add to that asset base and we aim to diversify into solar power to have
15-20% of our portfolio from that sector eventually."

This will be the second acquisition by IndiGrid from a company other than its original
sponsor Sterlite Power. In May 2019, IndiGrid received investments from KKR and GIC,
following which IndiGrid is managed by Sterlite Investment Managers which is majority
owned by KKR.

The pact to buy Jhajjar KT Transco Private is subject to approvals and marks the
infrastructure investment trust’s first such transaction with Kalpataru Power Transmission.
It is the second transaction with Techno Electric & Engineering Company, after acquisition
of Patran Transmission Company Limited in August 2018.

“We will continue to acquire operating assets and for that we are creating partnerships with
Kalpataru Power and Techno Electric who actively bid for developing power transmission
projects,” said the IndiGrid executive.

Jhajjar KT Transco is an operational intra-state asset under the ‘design-build-finance-

operate and transfer’ model, which evacuates power from the 1,320 megawatt thermal
power plant in Jhajjar. The project has a contract for 25 years which can be extended by
another 10 years. It has been operational for eight years, with a steady collection track
record and receivable cycle of less than a month.

IndiGrid currently has nine operating projects, which own 20 transmission lines with 5,800
circuit km length and four substations with 7,735 MVA capacity, with total AUM of Rs
12,100 crore.

Read more on Gic Deal Sterlite Power Kkr Indigrid Power Transmission

India Grid Acquisition

(Catch all the Business News, Breaking News Events and Latest News Updates on The
Economic Times.)

Also Read
IndiGrid completes acquisition of ENICL from Sterlite Power

IndiGrid Q4 results: Net profit doubles to Rs 99.7 crore

IndiGrid to acquire Rs 1,020 cr-transmission project from Sterlite Power

IndiGrid to acquire power transmission firm ENCIL for Rs 1,020 crore

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