Privatisation of Electricity Distribution – False Claims and Real Aim

This is the Fifth in a series of articles on the class struggle over electricity in India

Nearly 27 lakh (2.7 million) electricity workers are threatening to go on strike across the country if the government tables the Electricity (Amendment) Bill 2022 in parliament. The electricity workers are demanding that the government abandon its plans to privatise electricity distribution.

The Electricity (Amendment) Bill 2022 proposes to compel state-owned distribution companies to provide their network of power cables to private companies at a nominal fee. Electricity distribution networks built with public funds are to be offered almost free for capitalists to use, so that they can pocket maximum profits from the business of distributing electricity

UT Powermen Union protesting against privatisation of the electricity department in Chandigarh (Feb 2022)

The Bill also proposes to end supply of subsidised electricity. Every customer should be charged full rate, without subsidy. Any subsidy to be given to a category of customers should be provided by the state government through the Direct Benefit Transfer (DBT) Scheme, as is done in case of LPG cylinders. This will directly affect crores of farmers who have been opposing the Electricity Amendment Bill. They were assured by the central government at the time of repeal of the three Farm Bills that the electricity bill would not be amended without consulting them.

The advocates of privatisation of electricity distribution claim that it will bring in healthy competition, which will lead to more efficient and reliable power supply at affordable rates. Life experience so far does not support these claims. In Orissa, the first state where this program was implemented, the entry of private distribution companies did not lead to any improvement in efficiency or reduction in operational losses. Mumbai city has two private companies and one public company supplying electric power; and power rates in the city are one of the highest in the country.

Uttar Pradesh Power Employees Joint Action Committee (JAC) candlelight marches against the privatisation, Lucknow (2020)

The proponents of privatisation of electricity distribution claim that it will give customers the freedom to choose between different companies. In Delhi, different zones are under the control of two different companies, owned by the Tata and Reliance monopoly houses. Individual households do not have any choice whatsoever. They are at the mercy of one private monopoly or the other.

The same is the case in Mumbai where Adani Power and Tata Power supply electricity in the same area. Tata Power uses Adani Power’s network. This has not benefitted the customers in any way. On the contrary, the two monopolies have made electricity the most expensive in the country with rates of ₹ 12 to ₹ 14 per unit. The claim that privatisation of distribution would give consumers freedom to choose the supplier is false and made only to win the support of customers for privatisation.

UP Power Employees Joint Action Committee, Torch rally

One of the justifications given for the privatisation of distribution is that it would bring down distribution losses and improve collection of bills which would make electricity cheaper. A major reason for high distribution losses in the country is that state owned distribution companies have been deprived of funds to replace out-dated equipment and maintain and upgrade their present distribution infrastructure. Since private distributors are going to use the existing infrastructure of state-owned distribution companies only, the distribution losses cannot be brought down by privatisation. So, this too is a bogus claim.

The program of privatisation of electricity distribution has been on the agenda for the past 25 years or so. It has faced such widespread resistance, from peasants in the villages to working families in the cities, that the ruling class has found it to be one of the most difficult components of the privatisation program.

Starting in the middle of the 1990s, the Central Government allowed the World Bank and its so-called expert team to conduct policy dialogue with various state governments on how they should reform their state electricity boards. The aim was to create space for private companies to take over different parts of the business from the state electricity boards.

Power sector employees and engineers across the J&K UT held peaceful protests seeking withdrawal of Electricity Bill 2020

The first step in this program was to break up the state electricity boards into separate entities in charge of generation, transmission and distribution. It was called ‘unbundling’. The aim was to make it possible for monopoly capitalist companies to acquire the different parts, one at a time.

Electricity workers could see that the breaking up of state electricity boards was the first step towards privatisation. The decision of the UP government in 1999 to carry out such unbundling met with strong opposition from workers. All the unions came together and more than 80,000 power workers struck work in January 2000. Their repression by the state government angered power workers in other states and they all struck work for a day in solidarity.

Tamil Nadu Generation and Distribution Corporation (TANGEDCO) are protesting against privatisation

The Electricity Act 2003 provided the legal framework across the country for the unbundling of state electricity boards and the setting up of regulatory commissions in each state. Electricity workers continued to resist these changes. Even after 10 years of the promulgation of the 2003 Act, many states were not able to unbundle their electricity boards. Workers in Kerala and Himachal Pradesh succeeded in stopping the break-up into multiple entities. In each of these states, the Electricity Board was converted into a single corporation looking after generation, transmission and distribution.

State electricity boards have been in a poor financial condition for a very long time. The integration of electricity distribution within the administrative apparatus of state governments had led to high levels of corruption. Power was being supplied to privileged customers without raising any bill, or bills were raised but not collected. Privileged customers were not disconnected for not paying their bills. Those with political influence could get away with looting the state electricity boards. Moreover, the lack of funds for replacing out-dated equipment was leading to ever increasing transmission and distribution losses.

All electricity transmission and supply employees action in NOIDA (Oct 2020)

The monopoly capitalists decided not to invest public funds and administrative energy in addressing the poor financial condition of the majority of state electricity boards. Instead, they decided to use it to argue for privatisation of power distribution. This decision, taken in close consultation with the World Bank, has led to the further wrecking of the finances of state-owned distribution companies. Most of them have by now accumulated huge arrears of payment from state governments and city bodies for supply of electricity. They are forced to borrow every year to manage their operations. They are sinking into a debt trap from which they cannot extricate themselves.

The critical situation of state-owned distribution companies is being exploited by the monopoly capitalists to get access to the already established network of state electricity boards. The acquisition of such infrastructure at low prices would save them time and the capital required for creating a vast new infrastructure for distribution.

Employees of the Bihar Electricity Department faced water canon and baton charge of police in Patna

Electricity distribution in India comes under the concurrent list. That means that both Central and state governments can legislate on it. The Central government has used its powers to push for privatisation of electricity distribution in the Union Territories. Several state governments have carried out privatisation of electricity distribution to a greater or lesser extent. The monopoly capitalists are impatiently demanding that the Central Government pass a law applicable to the whole country which will allow them to easily take over the electricity distribution networks of the State electricity boards.

The Electricity Amendment Bill 2022 addresses these needs of the monopoly capitalists. It addresses their need to use the already established public infrastructure to distribute power and make huge profits with very little investment. It addresses their demands for cutting back on power subsidy to farmers and to poor urban households. It has met with widespread opposition from masses of workers and peasants.

The decision of the central government to privatise electricity distribution in the Union Territories of Chandigarh, Puducherry, Dadra Nagar Haveli, Daman Diu and Lakshadweep met with staunch resistance of workers and consumers. In these Union Territories, the claim of offering a choice of the suppliers to customers has been forgotten and the distribution is being handed over to one or another private monopoly.

Workers have successfully stalled so far, the privatisation of electricity distribution in Chandigarh by repeated strikes in February 2022. They sought the support of customers by pointing out that electricity rates in the union territory are among the lowest in the northern region but the government wants to sell the whole department to Goenkas who sell electricity at three times the Chandigarh rate in Kolkata.

Employees of Electricity Department staging an indefinite strike against privatisation of power distribution in Puducheri

A similar struggle was carried out by power workers and engineers of the union territory of Puducherry in Feb 2022 which forced the government to assure that no privatisation will be carried out without consulting them. As the government is now going back on its assurance, workers have resumed their agitation against privatisation.

In the Union Territory of Jammu and Kashmir, the privatisation was attempted by first forming a joint venture of the state transmission utility of electricity with Power Grid Corporation and later handing it over to a private company. In December 2021 the power workers and engineers of Jammu and Kashmir demonstrated their steely unity in agitation. They succeeded in putting an end to this anti-people attempt with the support of people of Jammu and Kashmir.

The struggle is intensifying against the privatisation of electricity distribution. The efforts of the power sector workers deserve wholehearted support from all other workers, peasants and other toiling people. It is a common struggle directed against the monopoly capitalists and their agenda of privatising public assets and services to fulfil their greed for maximum profits.

Read the Fourth part: Privatisation of Electricity Generation – False Claims and Real Aims

Read the Sixth part: Electricity is an Essential Social Need and Universal Human Right

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