Proceedings of the NIAS Workshop to discuss Power Distribution Sector Reforms in India - Role of Regulators and the Private Sector (NIAS Workshop Report No. NIAS/NSE/EECP/U/WR/20/2022)

Mahalingam, Sudha and Srikanth, R and Das, Soumya Deep (2022) Proceedings of the NIAS Workshop to discuss Power Distribution Sector Reforms in India - Role of Regulators and the Private Sector (NIAS Workshop Report No. NIAS/NSE/EECP/U/WR/20/2022). Report. NIAS.

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Abstract: Independent regulation is at the core of the electricity reform legislation enacted in India as Electricity Act, 2003. It addressed the power distribution segment, which is the cash register for the entire sector, by transferring the reins of governance of the sector from government to regulatory agencies. Yet, nearly two decades later, government seems to have wrested back control, reducing the regulator to a mere accounting intermediary. The accumulated losses of all State-owned DISCOMs at the end of 2020 have crossed Rs.5 lakh crore even after three rounds of reform between 2003 and 2019. In 2021, the Government of India has decided to pump in Rs.3 lakh crore more under the ‘Revamped Distribution Sector Scheme’ to turn around the DISCOMs. This approach is unsustainable and flags serious managerial deficiencies within the State-owned DISCOMs and the effectiveness of the regulatory mechanism in this sector. One of the key reasons for the continuing losses of DISCOMs is the steep escalation in power purchase cost which accounts for 70-80% of the annual expenditure of the DISCOMs. The sharp hike in PPC that cannot be recovered from the ultimate consumers immediately has a cascading effect on generation and transmission companies, with overdue amounts of Rs.1 lakh crore from DISCOMs. Further, due to the cash crunch, most DISCOMs cannot invest in upgrading the sub-distribution infrastructure. Therefore, it is evident that structural reforms introduced in the form of unbundling and corporatization of vertically integrated utilities and independent regulation and the new governance paradigm designed to depoliticize decision-making in the sector have spectacularly failed. In this context, the workshop sought views from stakeholders on the course corrections and the way forward by inter alia, addressing the following key questions: • What role can regulators play in improving the performance of the State-owned DISCOMs? • Is privatization of DISCOMs with a large share of agricultural consumption possible? If so, under what structure (100% privatization or PPP or Distribution Franchisee) and policy guidelines? • What are the potential gains and pitfalls of privatizing loss-making DISCOMs? How can the Regulators play a role in ensuring a smooth transition? • Regulatory independence and to some extent, even autonomy, despite the many protections accorded in the statute, have remained illusory. How to address this issue? Does it call for amendments to the selection committee, selection criteria and measures to insulate them from political interference? The Energy, Environment and Climate Change Program in NIAS organized this Workshop on 9 April 2022 to enable experts and key stakeholders to deliberate on the above issues and suggest the way forward. This report presents the gist of each talk during the workshop and the panel discussions, culminating in concrete proposals to ensure the effectiveness of the independent regulatory paradigm and improve the long-term viability of the DISCOMs. The implementation of these proposals is critical to facilitate the ongoing energy transition while safeguarding public interest
Item Type: Monograph (Report)
Keywords: DISCOMs, Electricity Regulation, Power Sector Reforms, Privatization of State Utilities
Subjects: Programmes > Energy Environment and Climate Change Programme
Doctoral Programme > PhD Scholar Publications
School of Natural and Engineering Sciences > Energy and Environment
Date Deposited: 12 Sep 2022 11:28
Last Modified: 12 Sep 2022 11:28
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    Funders: Ministry of Earth Sciences, MoES, GoI
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