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IT firms set to ride $2 bn India power reform

IT firms set to ride $2 bn India power reform
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First Published: Tue, Oct 20 2009. 01 47 PM IST
Updated: Tue, Oct 20 2009. 01 47 PM IST
Mumbai: Technology firms are set to cash in on the Indian government’s push to reform the country’s power distribution network, as India lines up over $2 billion to help cap energy losses through use of information technology (IT), industry players said.
The federal government has launched a $10.86 billion (Rs500 billion) plan to cut power distribution losses in the country, with a fifth of the funds devoted to using IT at state-run distribution companies.
“It’s a massive opportunity. As a business opportunity IT companies are excited,” said Rajdeep Sehrawat, vice president, of IT body National Association of Software and Services Companies (Nasscom).
Several Indian IT firms have eyed state-funded projects to help tide over the global economic slowdown, which had put the brakes on the sector’s scorching pace of growth as their core overseas clients slashed technology spending.
“This is the next wave. In the next 3-4 years the utilities will spend a lot of money, they don’t have a choice and the government is providing them a lot of money,” said Vilas Kanyal, business unit head at software firm Mastek, which is foraying into offering IT consulting for utilities.
The opportunity
Under the power reforms scheme—Restructured Accelerated Power Development and Reforms Programme (R-APDRP)—many domestic and global IT firms have been empanelled to serve as consultants or act as implementation agencies to distribution companies.
States like West Bengal and Rajasthan have already awarded IT projects, while others including Madhya Pradesh and Maharashtra are in the process of doing so, government officials said.
“Tata Consultancy Services (TCS) bagged a Rs1.93 billion project in West Bengal covering 62 towns,” said Moloy Dey, chairman, West Bengal state electricity board.
TCS has also been selected as lowest bidder for a project worth Rs2.93 billion in Madhya Pradesh, while HCL Infosystems won a project in Rajasthan worth Rs5.29 billion covering the entire state.
Under R-APDRP, IT work will involve setting up data centres, disaster recovery back-ups, GIS mapping, and entail applications for reading meters, billing and collection, energy accounting and auditing and consumer grievance redressal.
“About 30-plus distribution companies have identified IT consultants for R-APDRP,” said a federal power ministry official who declined to be named.
Typically, IT implementation projects could be worth about Rs1-6 billion while IT consultants could earn a fraction of that range, industry players said.
The challenge
State-run power distribution utilities are trying to improve their operations, but the process is hampered by extremely low levels of efficiency, said a recent report from India Infoline.
About 30% of the total power produced in India is lost in transmission and distribution each year due to pilferage and technical snags, compelling the federal government to invest in using IT to first identify the losses.
Several large discoms (distribution companies) continue to report losses of over 30%, and some even as high as 50%, McKinsey said in a report.
“The sector needs to cut losses to 15% in five years under R-APDRP with IT and non-IT initiatives together,” said Devtosh Chaturvedi, vice president of Feedback Ventures which, along with Mastek, is an empanelled IT consultant.
“The challenge is now going to be—can IT companies provide solutions for an integrated distribution system, given the antiquated systems (of discoms), the crowd and the volume,” Nasscom’s Sehrawat added.
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First Published: Tue, Oct 20 2009. 01 47 PM IST