The Uttar Pradesh (UP) government is looking at privatising one of its five power distribution companies (discoms) — Purvanchal Vidyut Vitran Nigam (PuVVNL).
This discom, which controls and manages electricity supply in eastern UP, covers two cities with political heft - Varanasi (represented by Prime Minister Narendra Modi) and Gorakhpur (the Assembly constituency of Chief Minister Yogi Adityanath).
Senior executives said the power department is planning to privatise PuVNNL to cut losses and improve supply infrastructure.
Varanasi was earlier slated to become the model city for urban power reforms. This included underground cabling, smart metering, and information technology-enabled electricity supply, among others.
Incidentally, UP has the highest discom losses in the country — both financial and operational.
As of March, the total net loss of all five discoms in the state stood at Rs 819 crore, according to the Ujjwal Discom Assurance Yojana (UDAY) portal.
The state’s average aggregate technical & commercial (AT&C) loss is 30 per cent - higher than the national average of 19.19 per cent.
Of the five, only two - Kanpur Electricity Supply Company (KESCo)and Paschimanchal discom based in Meerut are making a profit.
PuVVNL Managing Director K Balaji refused to comment on the matter.
UP Power Corporation (UPPCL) Chairman Arvind Kumar did not revert to calls and messages. UPPCL is the nodal body for all discoms, power generation, and transmission in the state.
Currently, only Agra in UP has a private power distribution franchisee run by Torrent Power.
In 2009, KESCo was offered to Torrent Power through a franchisee model. Torrent was supposed to manage the billing, connections, and even build additional infrastructure, while KESCo remained the owner. However, Torrent could never make headway due to repeated protests by Opposition parties and employee groups, and the deal was cancelled in 2015.
In 2018, UP had announced it would offer five cities, including capital city Lucknow and Varanasi, to a private distribution franchisee. This, too, did not take off.
Unlike the franchisee model, privatisation of discoms involves vesting ownership of the business with the private player. The company will manage power purchase, build infrastructure, manage billing and collection, and adhere to pre-decided targets of bringing down losses.
Delhi and Mumbai have privately-run discoms, of which the BSES-owned two companies are on the block.
Odisha recently offered power distribution licence of four circles to Tata Power.
“The Centre is enabling reforms through the new draft electricity Bill and has been pushing states to join hands with private companies. UP wants to welcome investment in power distribution. PuVVNL is chosen due to its high losses; its turnaround will set a precedent,” said an executive.
PuVVNL has a financial loss of Rs 1,500 crore as of March and AT&C loss of 37.9 per cent, according to the UDAY portal.
Sources, however, said UPPCL is not keen on the idea, while the state government tried to take it through.
It is learnt UPPCL has also raised concerns over some tenets of the new draft electricity Bill.
“UPPCL has concerns regarding the franchisee model suggested in the Bill, as it overlaps with the existing functions of state discoms. It is against the idea of direct benefit transfer in electricity, fearing it will create more loopholes in electricity billing,” said an executive in the know.
The Centre in April unveiled draft amendments to the Electricity Bill, 2003, and asked states to submit their comments.
Andhra Pradesh and Telangana have already opposed the Bill and written to the Centre to withdraw it.
The UP government is yet to submit its comments.
The geographical area of PuVVNL covers the districts of Varanasi, Ghazipur, Chandauli, Jaunpur, Sant Rabidas Nagar, Mirzapur, Sonbhadra, Mau, Azamgarh, Ballia, Deoria, Kushi Nagar, Gorakhpur, Maharajganj, Sant Kabir Nagar, Basti, Sidharth Nagar, Allahabad, Pratapgarh, Fatehpur, and Kaushambi.