Eight years after it initiated power sector reforms, Andhra Pradesh has pared distribution losses to 16.5%, less than half the national average. In the process, it has emerged as a role model to other states, many of whom have also initiated similar power sector reforms.
According to the state power sector performance ratings, prepared by credit rating agencies Crisil Ltd and Icra Ltd, the state ranked first in 2005-06. “The state has been doing very well and should keep it up. I welcome their efforts and congratulate them on their performance,” said Sushil Kumar Shinde, Union power minister.
While it was among the first states in the country to launch reforms, Andhra had, until recently, struggled to improve its distribution losses. Just five years ago, its average losses due to transmission and distribution aggregated 35%, closer to the national average.
“Increased revenue collection, reduction of power distribution losses and efficient management has resulted in this success,” says Rachel Chatterjee, chairperson and managing director, Andhra Pradesh Transmission Commission (AP Transco) and the face of the power sector reforms in the state.
Consumers are happy with the power sector reforms in the state. Avula Narasimha Rao, a civil contractor, said, “As a retail consumer, I am happy with the reforms in the power production and distribution sectors in the state that have resulted in uninterrupted power supply in the city.”
Peddiraju Subba Rao, another power consumer working as sales executive in a media company, appreciated the services being offered by the power utilities that include spot billing, multiple channels to pay power bills and centralized customer service centres. “The power utilities announce in advance the localities that are to likely have power cuts. This helps us plan our day well in advance. We can accordingly use the electrical instruments at home such as grinder, mixer and washing machine,” he said.
AP first created a competitive environment with the unbundling of APSEB into two entities—APGENCO and AP Transco in 1999. While APGENCO handled the generation function, AP Transco handled the transmission and distribution of power in the state. A year later, AP Transco was unbundled, transferring the distribution functions to five companies.
The power utilities were able to reduce their dependence on state subsidies by generating more revenue through improved collections.
“Our revenues have expanded so much on account of reduction in losses,” says Chatterjee. “Because of extra collections we are able to keep the costs down. Constant checks have also helped us.”
The total subsidy provided to the power sector, including cross subsidy, stood at Rs2,285 crore during 2004-05, Rs2,062 crore in 2005-06 and Rs3,114 crore in 2006-07. “The subsidy paid by the government is paid in time and in full amount due to which we (power companies) do not have a cash flow problem,” Chatterjee adds.
Commenting on the decision by the Congress government in the state to provide free power to farmers, Chatterjee says, “It is the government’s decision. Agricultural consumption (of power) has gone up, but we have been successful in managing the business within the said parameters.”
In order to better target rising subsidies, the state government has ordered an independent survey of agricultural pump sets in the state so that it can identify unauthorized users and through this improve the distribution efficiency of its electricity utility, a move that was first reported by Mint on 7 June.
According to the Crisil and Icra report, the key factors that have worked in the state’s favour include the comfortable financial position of the utilities; strong regulatory processes in place with timely filing of revenue requirements and issuing of orders; sound operating performance of thermal plants; strong support from state government through balance sheet restructuring and cash support to fund revenue deficits during the time of unbundling.
“AP has been one of the front ranking states in the power sector improvement enabled by a strong regulatory process, a very committed management and large investments in strengthening the transmission and distribution sectors,” said Anjan Ghosh, head of Icra corporate sector ratings.
AP Transco has also put down key performance indicators for its employees. Consequently, the company holds its employees accountable for the power units lost in their area.
“As all our feeders have meters, losses can easily be calculated. Based on the data we take action and monitor their performance on a monthly basis,” Chatterjee said. AP Transco and discoms have a combined workforce of 40,000.
While such employee practices have helped, “being at the job longer than the rest of the states has also helped,” says Karthik Ranganathan, head of investments-alternate energy and engineering services, Baring (India) Ltd
Andhra Pradesh has a total installed capacity of 11,617.4 MW of which the state’s power generation utility APGENCO accounts for 6,760.9MW. The state plans to add 8,963MW of capacity by 2012 at an investment of Rs35,000 crore.
The state has invested Rs5,247 crore in the transmission and distribution sector in the last three years. During the current Plan period (2007-12), an investment of Rs6,074 crore is planned for expanding distribution network and Rs4,498 crore for strengthening the transmission system.
However, some problem areas still remain. The state has so far extended metering to only 52% of the connections, even while household electrification is at 78%.
The state utility is also saddled with accumulated losses of Rs2,400 crore on account of non-payment of dues by consumers. “Half of these case are in courts and the 30% of the dues belong to those industries who have gone to Board of Industrial and Financial Reconstruction (BIFR). The remaining dues belong to below the poverty line consumers,” says Chatterjee.
Consumers also have few complaints. “For the first time in the last few years during the latest summer we experience power cuts in the city. Another problem that we faced of late is the introduction of slab system in the billing as a result of which our monthly power bills have gone up by as high as 50%-100%,” said Avula Narasimha Rao. Asked whether the AP model can be replicated, Chatterjee says: “Our model can certainly be replicated if the respective state government support their utilities. Our government ensured that our networth was not eroded and allowed us to function as an autonomous body.”