Privatisation of Electricity Distribution is anti worker and anti social!

Highlights of the Presentation by the KEC

The Electricity power sector was primarily in the public sector till 1991 due to the large capital required. With the launch of the program of globalisation through privatisation and liberalisation, power generation was thrown open to the private sector. Expecting huge profits, many big capitalists like, Tata, Anil Ambani, Adani, Jindal, Mehta of Torrent, GVK, Jaypee entered this sector. Now nearly half (47%) generating capacity is already in the private sector, including the entire renewable energy capacity of 24%.

The Electricity Act 2003 further pushed privatisation of the power sector. It mandated the break-up of the sector into three parts– generation, transmission and distribution so that the profitable parts, generation and distribution, could be privatised and the unity of workers weakened. The corporatization of Electricity Boards was done by forming three separate companies each.

The first successful major privatisation of power distribution was done in Delhi in 2002 when Tatas and Reliance of Anil Ambani took over power supply and distribution. In many states and cities, privatisation of distribution failed because capitalists did not find it attractive and state discoms had to take them back, leading to loss of hundreds of crores of public money.

Private power distribution continued in Mumbai with Tata and Adani and in Kolkata with Goenkas. In Ahmedabad both the generation and distribution is with Torrent. Capitalists concentrated on large consumption centres, concentrated in small geographical areas, while rest of the areas, primarily rural, were left to state discoms (Distribution Companies).

Different approaches to privatisation have been followed. In Odisha, Tatas have taken over the entire distribution company, the Central Electricity Supply Undertaking. In Maharashtra, the state-owned electricity company is franchising billing and collection. This was first done in Bhiwandi 10 years ago by handing over the franchise to Torrent. It has been done in many other cities of Maharashtra after that.

Having acquired a significant share of one profitable segment – generation, capitalist monopolies want to acquire the other profitable segment- distribution, by taking over state-owned distribution companies or by becoming distribution franchisees of state-owned distribution companies. Generating companies sell power to distribution companies who in turn sell to end consumers and collect money from sale.

The Union Budget 2021-22 announced that all categories of consumers will be given choice to “choose Discom for electric supply for availing efficient and cost effective services” and therefore it is proposed to delicense distribution. The present Discom can continue to operate as they are now, but private Discoms will also be allowed distribute power in the same territory. Consumers shall have the opportunity to select their service provider. For implementing this decision, Electricity Act 2003 will be suitably amended

The Finance Minister also declared that power distribution in the Union Territories will be privatized without waiting for amendments to the Electricity Act 2003. The privatisation process has already begun and it plans to complete it before the end of 2021. All these territories are profitable with very low T&D (Transmission and Distribution) losses. Privatisation will enable the capitalists to reap big profits.

The proposed Electricity Amendment Bill 2021 has a new clause – “A distribution company shall provide non-discriminatory access through its distribution system to all distribution companies registered within the same area of supply….” – to implement the announcement of the Union Budget.

Monopoly capitalists who control power generation want to ensure that distribution companies, public or private, honour payment terms as per the contract. The interest of capitalists owning generating companies is being taken care of by asking the National Load Despatch Centre (NLDC) to ensure that “… no electricity shall be scheduled or despatched under such contracts unless adequate security of payment, as agreed upon by the parties to the contract has been provided.”

The introduction of multiple distribution companies is the first step towards complete privatisation of state discoms. Most state distribution companies have large outstanding debts to the power generation companies. Once private discoms enter a territory and start competing, using the distribution network of the state distribution company for free, the supply of electricity to state discoms may be stopped by NLDC under the excuse that they have not cleared old dues of generating companies. The state discoms will be made bankrupt and then sold to private capitalist monopolies at throw away price.

Large concessions are planned to be given to capitalists to promote privatisation of distribution as per the Standard Bidding Document, drafted by the Ministry of Power.

  1. Assets of the existing discom, other than land, will be transferred to the new entity at Net Asset Value.
  2. Land in possession of the existing discom shall be provided at nominal charges.
  3. Private discom will not be responsible for any accumulated losses or unrecoverable dues.
  4. Bulk power purchase cost for private discom shall be subsidized for a specified period of 5 to 7 years so that private discom makes profit from day one.

If all these concessions were to be offered to state discoms, they could also be financially viable. Once there are no state discoms to compete with private discoms, all private discoms can collude and exploit electricity consumers as they wish.

Many bogus claims are made about benefits of privatisation of power distribution for consumers. Privatisation is claimed to bring down T&D losses, thereby increasing the supply, ensuring uninterrupted power and lowering the price of electricity.

There are two causes of T&D Losses: Technical reasons such as old transformers, old or improper cables, improper joints, etc. and the theft of electricity. There is no estimate of magnitude of losses due to technical reasons; they are expected to be quite high as state discoms have not been provided capital to replace old/inefficient transforms, cables, joints, etc. The impression is given that theft of electricity is responsible for high losses. State discom workers are blamed for high T&D losses, for not collecting bills. This is deliberately done to pit consumers against workers.

From 2001-13, state discoms had already reduced T&D losses by one-third. Further, ownership has nothing to do with T&D losses. In Himachal Pradesh and the Union Territory of Chandigarh, the state discoms have T & D losses less than 10%, whereas in AP and Kerala they are 12%. The corresponding figures for private discoms are 14% and 15% in Agra and Bhiwandi respectively, and less than 10% in Delhi. Further privatisation has led neither to cheaper electricity nor to uninterrupted supply, as the experience of Delhi has shown.

In the Amendment Bill 2021 a misleading claim is made that there will be multiple distributors in a territory and that consumers will have the choice of selecting the electricity distributor.

This is deliberately mixing up large scale industry which consume massive amount of power, with the individual home consumer.

Electricity consumed by large scale industry is already hugely subsidised. They have the choice to buy electricity from the cheapest source. India Energy Exchange (IEX) is a power trading platform where electricity is bought and sold and the day to day price varies. On 16 April, 2021, 1.78 lakh MWhr of power was exchanged at the price of Rs. 3.91 per unit. However, the price charged for consumers was Rs. 10 per unit in many parts of the country.

On the other hand, as far as individual consumers are concerned, they do not have any choice as to which distributor to purchase electricity from. In Delhi where three companies have been operating for last 18 years, consumers do not have choice. In most cases all over the world, individual consumers have no choice; invariably there is one monopoly supplier.

In the 21st century, electricity is one of the basic needs of every human being. It is impossible to get even basic education without it. Now the government is completely washing its hands off from the social responsibility of providing a basic necessity to all by privatising electricity distribution!

Earning private profit cannot be the objective for a basic necessity of people. All workers and consumers have to demand that government that must fulfil its primary responsibility of ensuring good quality electric supply to every resident of the country at affordable rate. The government should provide necessary funds to state discoms to revamp the age-old infrastructure for reducing T&D losses so as to reduce cost of electricity and improve quality of supply for consumers!

Privatisation of electricity distribution will directly affect lakhs of workers of state distribution companies. It will deprive large number of people from a basic necessity of life. Loot of assets built with public money through privatisation cannot be allowed!

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