Privatisation of UT discoms in the slow lane

Plans to privatise loss-making state-run electricity entities (discoms) are being hamstrung by political and legal hurdles, even as they continue to be a drain on the exchequer and a burden on the taxpayer.

Although the Centre announced a plan to privatise discoms by putting on the block all the six discoms in union territories (UTs) in May last year as part of the Atmanirbhar package, only two of them have called for bids so far – Chandigarh and Dadra and Nagar Haveli & Daman and Diu (DNHDD). And the sale of the Chandigarh discom is impended by a stay order by the Punjab and Haryana High Court.

The target was to privatise all UT discoms by January 2021.

Of course, unless the state governments pitch in, privatisation of the discoms owned and governed by them will remain an unfulfilled task.

The two UT discoms that have floated the tenders are seen to be the “lowest hanging fruit” among all the UTs, thanks to their low levels of aggregate technical and commercial (AT&C) losses, against the national average of 26%. While Chandigarh consumes around 1,600 million units (MUs) in a year, DNHDD uses around 9,000 MUs.

More than 50% of the demand comes from industrial and commercial consumers in Chandigarh and for DNHDD, these segments comprise 90% of sales, reducing concerns about timely receipt of subsidies from the government. The electricity department of Puducherry, which caters to annual electricity demand of 2,800 MUs, 65% of which is from industrial and commercial users, is expected to be the next entity to open bids for privatisation, government sources said.

The progress for privatisation has been the slowest in the UTs of Jammu Kashmir and Ladakh, which are mired with security issues and high level of losses.

“There will be more interest for the discom of Jammu, but if the government comes out with a single tender for the combined discoms of Jammu and Kashmir, private entities are likely to be less eager,” a senior official of a private entity told FE on condition of anonymity.

Among the UTs discoms, the largest is located in Jammu and Kashmir, which owes Rs 4,525 crore to power generators as on December-end. Its AT&C losses are an awful 69%.

The discoms in the island UTs of Lakshadweep and Andaman and Nicobar will also go under the hammer for private companies. But there are doubts about investor interests since bulk of the power supplied in these areas come from diesel, cost of power is prohibitively high, warranting a high subsidy support. The power departments of these UTs are deliberating on rationalising subsidy structure, and once that is finalised they will come up with their tenders. “Andaman discom is likely to invite bids pretty soon,” a source aware of the developments told FE.

While Chandigarh was the first UT to call for bids, the development was disrupted by worker protests. Additionally, the High Court of Punjab and Haryana in December put in abeyance the privatisation of the discom. The Supreme Court subsequently stayed the high court’s order and asked it to expeditiously come to a final decision regarding discom’s privatisation and issue an order “preferably within three months”.

Subsidiaries of Sterlite Power, ReNew Power, NTPC, Adani Transmission, Tata Power and Torrent Power have reportedly been shortlisted as final bidders for the Chandigarh discom.