New Delhi: India’s state-owned power utilities are getting computer-savvy and will place, before March 2009, orders for Rs10,000 crore of software that can help them manage their distribution networks better.
The size of the order, the largest to be placed by power utilities, is likely to come as welcome news for software firms, both local and global, that are gearing up for a short-term slowing of business on account of the recession in the US, the largest market for software.
The software initiative is part of the government’s Accelerated Power Development Reform Programme (APDRP) which aims to improve power distribution systems across the country. “The tenders for the (systems that allow) IT-based electricity flow (and) accounting and auditing software will be awarded within this financial year (2008-09),” said a Union power ministry official who did not want to be named. The power ministry will fund state governments which, in turn, will get their distributionutilities to place orders for the software.
Power shortages due to limited generation capacity and growing electricity theft have been identified as one of the key infrastructure bottlenecks threatening India’s ability to sustain an economic growth rate of more than 8%. Around 34% of power generated in India continues to be lost due to theft and pilferage. The country has an installed capacity of 141,000MW.
APDRP was created for upgrading distribution systems, minimizing transmission and distribution losses, improving metering, and assigning responsibility for realization of user charges. The scheme has been a failure and did not meet the deadline of 2007 for reducing transmission and distribution losses to 15% as envisaged in 2000-01 when it was conceived. “We had a meeting with leading IT and software vendors through the aegis of Nasscom (India’s software lobby group). Firms such as Infosys Technologies Ltd, Tata Consultancy Services Ltd (TCS), International Business Machines Corp. (IBM) and Satyam Computer Services Ltd have evinced interest. We will shortly be taking the proposal to the cabinet for clearance,” the power ministry official added.
Spokespersons for IBM and TCS declined comment. “The power sector is opening up and IT can play a major role in bringing about standardization, transparency, revenue realization and transmission and distribution losses in the sector. Technology innovation can only benefit the sector,” said Ranjan Tayal, head, India region, Satyam Computer Services.
The Rs10,000 crore given by the Centre to the states will initially be treated as a loan. After the states introduce IT-based electricity flow (essentially power supply through distribution networks managed and monitored through computers), and accounting and auditing software, the loan will be converted into a grant in phases based on targets in terms of reduction in transmission and distribution losses.
The Rs10,000 crore is in addition to the Rs51,000 crore budget that the finance ministry has cleared for the restructured APDRP, which will soon be sent to the cabinet for approval. Under the scheme, the Centre will provide Rs51,000 crore in loans directly to state electricity utilities to finance investments needed to carry out power sector reforms. If the utilities do meet certain targets, the loans will be converted into grants.
However, one expert said more than software would be needed to increase efficiencies of India’s power distribution utilities. “There is a huge need for specialized and customized software for the power sector. But this has to be accompanied by a large-scale business process re-engineering exercise. None of the existing software systems are directly applicable in the utility environment. Most of the billing solutions are outsourced. The sector is in dire need of upgraded software systems that can be implemented on a large scale,” said Shubhranshu Patnaik, an executive director at audit and consulting firm PricewaterhouseCoopers.
The size and the scope of the software order are significant.
“The software will be implemented for 600 projects through state utilities across the country and will help in project monitoring both at the Union government level and at that of the states. It will help the state utilities in pinpointing and stopping pilferage,” the official said.
While most large software firms, including foreign ones such as IBM and Accenture Ltd and homegrown ones such as Infosys, have issued optimistic guidances for the year ahead, some of them have admitted that there could be short-term problems. On 15 April, while announcing Infosys’ results for the quarter ended March and guidance for 2008-09, the company’s CEO, S. Gopala-krishnan, said much of the growth would come in the six months starting October 2008.