The leaking pipe: Fixing India’s Discoms | ft. Alok Kumar

[Podcast intro]

Welcome to the season five of the India Energy Hour podcast. This podcast explores the most pressing hurdles and promising opportunities of India energy transition through an in depth discussion on policies, financial markets, social movements and science. Your hosts for this episode are Shreya Jai, Delhi based energy and climate journalist and Dr. Sandeep Pai, Washington based energy transition researcher and author. The show is produced by 101 reporters, a pan India network of grassroots reporters that produces original stories from rural India. If you like our podcast, please rate us on Spotify, Apple Podcasts or the platform where you listen to our podcast. Your support will help us reach a larger audience.

As India moves to reduce its coal dependence and reach its climate goals, the spotlight is turning to hard-to-abate sectors that are both energy-intensive and vital to economic growth. What would a realistic transition look like for these industries? And how can finance, policy, and innovation come together to drive change?

In this episode, we speak with Girish Sethi, Senior Director of the Energy Program at The Energy and Resources Institute or TERI to unpack one of the toughest challenges in India’s clean energy journey — decarbonizing the steel and cement sectors.

[end]

[Podcast interview]

Shreya Jai: Hello and welcome to the India Energy Hour podcast. Thank you so much, Mr. Kumar, for joining us here today. We are absolutely delighted to have you here. We are getting this chance to pick your brain over your decades of career in Indian bureaucracy, your experience, especially in the power sector. And we can’t wait to dig in more on this. Thank you again for joining us here today.

Alok Kumar: Thanks a lot for hosting me on this India Energy Hour podcast. I am equally delighted to join your program. You are welcome.

Shreya Jai: Thank you. I just, as is our tradition with this podcast, before we delve into the topic and, you know, dedicate another hour into discussing what the topic at our hand is, which today is something very interesting, is the India’s power sector and especially distribution reforms. We would like to focus on the person as well. And you yourself have, you know, had held various coveted positions in the state and central government as an IAS officer. So can you tell us about your professional journey? Where are you formed? How did you decide to get into civil services, your initial years, and also some exciting, you know, positions and roles that you took up during this journey?

Alok Kumar: Well, my whole of the initial schooling happened at Saharanpur. It’s a town in Western UP. And I come from a family where my father is in teaching profession. So as usual, there are a lot of focus on studies in our family. So I did my, say, class 12 from Saharanpur. And I secured first position in the whole UP board in 1979 in class 12. And thereafter, I joined IIT Roorkee. In those days, it was called University of Roorkee. I passed out my degree in civil engineering. In fact, initial focus was more on, say, taking up an engineering job. So we wrote Indian Railway Engineering Services. But in the last year, some of my friends were writing their forms for the prelims civil services. So I was, I got curious. I asked them, what is it? So they explained to me. But at that time, I was only 20 years old. And it was minimum is 21 years. So I had to wait for one year. So next year, I filled up my form. I got into civil services. And for the time till I got into IS, I was in railways for most of the time doing my training. About the postings, I still vividly remember first posting in Rani Khet, say, as those days were the joint magistrate. Only few people could become joint magistrate. So Rani Khet was part of UP. And I did some very prestigious districts, suggesting magistrate in Varanasi and Gajiabad. The two other districts are Fayzabad and Banda. So, and I was also fortunate to work with the chief secretary as a staff officer. And then transport commissioner and managing director of state roadways transport corporation. But real journey started in 2003 when I moved to ministry power as director reforms and restructuring in ministry power. And then I learned the whole thing of the Select City Act and unbundling of SEBs and all. I, after a tenure in ministry power, I moved to the Central Electricity Commission. We did a lot of pathbreaking reforms. I moved on to state, some postings in industrial development department, some housing and say electronics and IT. But most of it was in power and renewable energy. So I was the chairman of the distribution companies, the transmission company, generation company, renewable energy development agency. And in the government of India, there was some tenure in the skill development domain. And textiles. I was development commissioner, handlooms and handicrafts. And back to government of India again, I was secretary in the ministry power government of India. So most of it has been in power sector, renewable energy and infrastructure development. So that is what my journey has been so far. And I will say most important part has been that once you join this government of India, then you always want to come back to government of India. So it gives you a very powerful perspective, national perspective as well as international perspective. That’s all for this part. 

Shreya Jai: Thank you for that. If I can quickly ask you, you mentioned that, you know, most of their positions were around power infrastructure. You have had several positions there and, you know, were at helm. So if I can ask, what has been your most challenging role, if you can tell that? Was it power in the power sector? If not, then what was it?

Alok Kumar: I will say one of the most challenging period of my professional journey was implementing Swabagya in Uttar Pradesh. So Uttar Pradesh had the largest number of hamlets, which were used to call them unelectrified or virgin hamlets. So they ran into thousands and thousands. And Ministry of Power and Government of UP, they gave us a mandate that it has to be done within one and a half years. So mobilizing the whole machinery, right from planning, tendering, execution, and lighting up those hamlets and crores of households was the most challenging but most memorable journey in my career. One thing. Second, I will recall, while in Central Legislative Reliability Commission, apart from other things, the transmission was the backbone of the power sector reforms. So we could do two very key reforms in transmission sector. First is the point of connection tariff. Say, if you remember earlier, there was a problem of pan-kicking of transmission charges. If power was flowing across five reasons, so you have to add the charges every reason, pan-kicking. So 30 paisa, 30 paisa, five times, one and a half rupee. So there is a problem in the integration of city markets. So we could introduce the point of connection tariffs, so whole India grid, and you pay on the basis of where you inject and where you draw the power. So that was the very path-breaking reform power sector. And second was the transmission projects were taken up, tied up to beneficiaries. So we used to run, after the states, please sign this agreement so that we can approve the investment for transmission. That was not the case. That was not the way we could build the grid that India has today. So in CRC, we took a decision to delink the investment approval in transmission from the prior consent of beneficiaries. And in one go, I remember somewhere in 2010, we approved transmission projects worth 51,000 crores rupees in that year. So that was one path-breaking thing. I think those are the two things which you see the power exchanges and the power markets and the one integrated grid in India. So those are the most challenging thing like obtaining universal access in one of the largest states in India. And also the path-breaking reforms in transmission segment of power sector.

Shreya Jai: Absolutely. I think transmission is a very important link, often ignored when policies are being made. But as you said, hugely responsible for a vibrant electricity market in India. Now that we are on the subject of electricity market, let’s come to what is always called the pain point of India’s power sector. And that is distribution, which has been marred with financial and operational losses over the years. There have been financial restructuring schemes, I think four in the last 15 years. There have been several reforms to fix the problems. Let’s start with what do you think are the key reasons behind this ailing state of distribution in India?


Alok Kumar: A little bit of history. It was not always so. Beginning 1910, we started distribution electricity in major towns of India. India. And it was mostly done by private companies. And there was a, say, localized generation through DG sets and some gas engines, some local hydropower. And the distribution was limited to the city residents. And it was fairly, say, profitable business. But after independence, when we constituted the aestheticity boards, the main focus was on expansion of grid to semi-urban and rural India. That was the need, the felt need of the people of India and the political system. And if you see, India achieved universal access somewhere in 2019. So, we took almost like 50 years to expand the grid from few cities like in UP, Kanpur or Lucknow to a hamlet of like Balia or Pratapgarh or Gonda and all. And if you see, in those years, the efficiency or the profitability was not the key focus, neither for the organization, nor for the governments. The whole mandate was to expand, expand, and expand the grid to give the access to electricity to every citizen. So, your organizations of state electricity boards were heavily engineering oriented because it was all construction, construction, construction. So, when you have that type of focus for organizations, that you are an engineering organization and you have to simply do construction and expand, then the efficiency improvement and profitability takes a backseat. One more thing happened. So, when you expanded the grid to rural areas and smaller towns and agricultural consumers, you see you are taking electricity to comparatively a poorer section of society. And they constitute the large number of votes for the politicians. So, on the one hand, the mandate was to take it to the such large sections of society which are very marginal in income. And the political system and the ground reality did not allow, say, tariff to be cost effective or collection of the bills in an efficient manner, in a professional manner. The result was that the distributing electricity to agriculture consumers and poorer households and focus being on expansion. So efficiency and profitability became a crisis somewhere in early 90s. And if you see, then there was this NDC committee headed by Sharath Pawar and HCM’s committee. Then they sat together and they say, there has to be efficiency, maybe boards will have to be reorganized, there has to be minimum tariff, otherwise it is not sustainable, demand is increasing. And the shape SEBs are, no private sector will come and governments can’t invest that type of money to expand the system. So private entry came like double and all, but it did not succeed because basic problem was the business model of the SEBs. And then we had this, say, unbundling of electricity boards and all. So some of the characteristics of those areas, those, say, times still remain. Say, if you, we segregated generation company, transmission companies. So most of them have become profitable. I think they are reasonably in a good shape because there is professionalism. But distribution is the one business which is still, in many states, is the engineers oriented. And this whole issue of tariff setting and collection of bills has become highly politicized. So I will say the key factors behind these problems of distribution segments in financial and operational losses is the legacy of our organizations being very heavily engineering focused, construction oriented, lack of managerial capacity because mostly engineers were mailing the top posts. Or in some later, after unbundling, they posted very young IS officers with not much experience in, say, senior managerial positions. And state governments also, they could do with, say, not paying subsidy, not paying government dues, not allowing tariff revisions. So things have come to this scale. But now, as we go forward, I will discuss with you how things are changing and how the realities are changing. So that is, I think, I feel the sum and substance of the reasons for the present problems in distribution segment.

Shreya Jai: Thank you for sharing this history. A lot is not talked about it, that it is a problem that has grown over the years and has remained unchecked. And the sole reason is that electricity continues to be treated as a social commodity rather than both a social and economic commodity. And that thinking is clearly missing. Do you think that the reform schemes that were planned over these all these years targeted this particular problem? Or were they just fixing a part of the problem, hoping that the supply chain will take care of it?

Alok Kumar: The earlier attempts right from 2002, when we had this tripartite agreements and this, there is some bonds and restructuring. I will say the focus still, most of the schemes except Uday, was either say, often on some bailouts, but still the focus was on the expansion of grid. If you see Dindya Rapa there, Gramiduti Yojna, Rajiv Gandhi Yojna, then Swabhagya. So, I will say that there are some attempts, but we could not succeed fully because of two reasons. The main thrust of the programs, most of the programs was to push grants and assistance to states to do the expansion of grid. And number one. Number two, the type of monitoring which requires year to year was not based on the real picture of audited accounts. This is a very, very basic problem which has been in distribution segment. That in many companies, accounts were delayed by three, four years. So, during the life of the scheme, you had a very rosy picture. But after four years, you discover that actually that rosy picture is not that rosy. It’s quite a scary picture. But by the time the scheme is going towards closer and your pressure is to spend money, expand grid. So, that has somewhat changed in the current dispensation I will discuss. If you see the way this RDSS was designed, there are, of course, targets for grants and construction and all. But the conditionality of releasing of grant is based on an agreed action plan. And which has intermediate milestones also. It is not some targets loosely buried below the pressure to execute the work in grant. Upfront, RDSS said that grant will not flow in a year if you don’t meet the target which you agreed enough in your action plan. And there are also pre-qualifications. And I say one of the most important thing is that you have to produce your audited accounts right by September of the next financial year. In my sense, that has brought a lot of discipline. Of course, there has been some other measures which I will discuss, say, in a few minutes. But I say, if we summarize earlier schemes, why they did not succeed? Because most focus was on, say, this expanding grid to the villages, majora’s and households and spend the money. And there was no real focus on very strict monitoring based on your audited accounts, not linking the reserve grant to the non-achievement and all. So, that was the reason on bailout side, I will say, bailouts were not followed up. I’m not ruling out the possibility for future. But generally, the current, say, realization in the ministry of power as well as the state says, that bailouts will not do good to the sector. So, now, if you see, there are several measures in place, not on one front or several fronts. Which, in a way, are keeping the discoms maybe on track, on improvement. Maybe improvement is not the speed we want. But it has come to a new paradigm now, in my view. So, I will stop at it at the moment.

Shreya Jai: Got it. And good that you mentioned the parallel between how, you know, the modernization and electricity access schemes were running parallel with all these schemes aiming to reform the whole distribution system. But these two are kind of dependent on each other as well. We have seen several case studies of states which were financially incapable to take up electricity access reforms because either their finances were not in place or they were not that much economically equipped to take up large-scale reforms. So, do you not think that these two are dependent on each other? And if, you know, discoms do not fix their own backyard, they cannot, you know, move forward, bring in much more reforms, better technology, better services to electricity customers?

Alok Kumar: Both yes and no. Because when you have a political urgency and mandate to do the expansion of grid, I’ll give an example. If you see the data from Uttar Pradesh, and I was there, in 2018, the whole organization was geared up for improvement in the, say, building efficiency, energy auditing and all. But suddenly we were told, and we respected because it’s a political mandate, that you have to deliver in next, say, 18 months, this is a baghia. So, the orientation of the whole machinery changes and it changed in UP also. What I’m going to say, when you change the organizational focus, so that the accountability and your delivery KPIs, they also change. And once you have expanded, like, for example, in a discom, like Varanasi discom, we added something around 60 lakh consumers in a period of maybe one and a half year. The consumer base has become more than double. So, now your managerial systems, your metering and your monitoring, this goes really out of gear. So, I’m giving you again and again this, say, my insight, that organizational focus was there on expansion, not on the supply reliability or efficiency improvement. But now, after having achieved universal access, in some state it is faster, in some slower. Generally, there is a realization that discoms have to be made, say, sustainable and viable. If you have to achieve the, now the dream or the, now the requirement of a modern power system, which gives you, say, a reliable power supply, less number of interruptions. So, now that focus is again getting restored, if you see. Of course, this culture of free power is still, say, is a pain and it’s one of the challenge. But system is trying to tackle with those free power things also in its own way. But I can say the focus which we are now seeing for the last three years on efficiency improvement was not there earlier. If you see the type of scheme design or scheme monitoring was there. So, you have different eras. Like if you see Europe also, during the industrial revolution, the focus was on production and production. They have a lot of problems in pollution and sanitation. But once they achieved this level of living, then the focus turned to these aspects. So, I will say, in power sector of India also, something at 2021 after Sabhagya completion, the now focus has changed to efficiency improvement, viability, reliability, capacity, say, adequacy and all. Things that have now changed. That thrust, that era of expansion and expansion, I think we have almost done. Now is a challenge in our hands. Yes. Yes, please.

Shreya Jai: Great. I like the parallel that you have drawn. And I think I agree to an extent that there is always an era. And this is the era of, you know, I hope an era of revolution in the India’s power sector where this comes go through a cease change. You have opened a lot of threads here. Let me first, two, three things I want to dwell into. One obviously is free power. The other is expansion now, modernization later. But you cited the example of Uttar Pradesh. I would like to cite an example that is cited by everyone whenever we are discussing this comes, is Gujarat. How their expansion, modernization and reform went hand in hand. Can we discuss that model for a few minutes? What are the lessons drawn from there? And are those lessons being replicated across other states as well?

Alok Kumar: I’ll say the key factor in success of Gujarat, there are two key, key factors. First is, Gujarat had a very favorable consumer mix. They had a very high level of industry consumption. So, the whole tariff mechanism is in different paradigm, like cross subsidies and all. That is one. You have to take into account that thing. Second, key success factor has been a continuity of political leadership which believes and which delivers that despite of all pressures, we will keep improving our power sector and deliver a better power supply for our large and smaller enterprises and our households. Say, I don’t want to go into political domain, but right from 2002, you see the almost same political regime, which is a commitment which has stood behind the power sector reforms. So, if same thing is happening in Haryana, but it did not continue in Andhra Pradesh after the first regime of Chandran Rav Naidu, you see the change in the political regime. I will say certain things are given thing. Your resources, your consumer mix. So, the conditions are more more conducive or less conducive. But the key factor as long as our distribution companies are government-owned is the determination of political leadership and its continuity. So, that Gujarat model can be repeated. You can see the success in Assam also. Bihar also because continuation of leadership. Bihar being even so in a perceptionally backward state, I don’t take Bihar as backward state. they went ahead and implemented prepaid metering even before the government of India mandated. It’s a political resolve. So, power sector, as long as your companies are government-owned, they are basically, they can reform, continue to reform and sustain reforms if there is sustained political leadership which has that willpower and resolve and which has a longer-term vision for the state that if power sector is viable, if it delivers, it will bring investment, it will bring jobs also to you. So, it’s a matter of political leadership and your resource and governments or your consumer needs. I will say that to your question.

Shreya Jai: Right. And however, much researchers or even outside commentators might dislike it but in India, it seems politics and electricity will remain intertwined and have always been. So, how to address this problem of free electricity and also subsidize electricity to a section of the population which given the demography of the country and the democratic institution that we have, cheap electricity to a section of the population is not just a political tool. It is a social tool also because it helps uplifting a certain section of the society while giving them access to something as basic as electricity. But free electricity is a menace. It exists in an urban town like the national capital of the country as well. Why it continues to be a political tool? First. Second, according to you, how can it be tackled? You said that political willpower is one thing. What are the other tools with which it can be handled where you can manage both the social pressure that a political party faces versus the economic demand of the power sector?

Alok Kumar: You don’t get social. So, my answer will also be maybe I’ll try to see that. I keep it simple. Say, I’ll give you one background. it is also a product of the say your income levels in the type of money you spend on energy. Say, I have one data like in a country like Canada, a household spends only 3% of its income on energy costs. Whereas in India, on an average household spends 6.5% of its income on energy costs. So, affordability is an issue and it reflects into the politics because the households and farmers are the largest number. That is the reality we can’t learn from it. So, there is other temptation to placate or to please those voters to give cheaper power and all. now you have to see the consequences of say unbidden unlimited free power and not paying for it. So, our legal framework says that you can give a tariff subsidy but you pay for that subsidy in advance. If you implement that provision strictly and tariff policy also says that there will be two type of tariffs every time with subsidy without subsidy and if you don’t pay higher tariffs will come into play but bills will be higher. So, that is a key factor if you enforce that which I am happy is now being enforced substantially well. It brings a reality when you draw out the budget of the state government that you are paying this much money on subsidies there is nothing left for development on the other activities. And I am telling you as you develop there will be larger demand of continuous power supply better power supply infrastructure which can supply reliability so I will say two things free power had its own ills I have never supported free power free power and many ills I will speak about those in a moment but to keep focused on your question I will say free power and its consequences will come in front of the politicians if you enforce section 65 provisional history act that you pay your subsidy and at the same time there is an equally strong political demand for the politicians to have investment to have good supply for industries to have a reasonably priced supply for industries for creating jobs now fortunately the free power is being talked and it’s still a problem but many states are realizing now that if you are not able to give good supply to your industries and big urban towns your economic development will not happen jobs will not come so once you have that realization then balance will come and there is a limit to which you can fund the subsidy so I will say one more thing I don’t have very precise research but if I say earlier free power was announced in terms of 300 units per day per month but now if you see that amount has come down to 200-150 in most of the states so there is an underlying realization nobody will commit publicly but there is a realization that this is not sustainable Karnataka is talking that no this this type of freebies are not sustainable we can’t we don’t have cash so there is a say some somewhat I think correction started happening because they have to pay for it but there are other say fallouts and say undesired consequences of free power that we can talk separately.

Shreya jai: yes can you please talk about it the consequences and also at the same time address this issue that why should a certain section in the Indian society not get subsidized electricity.

Alok Kumar: the first free power brings all type of indiscipline right from bottom there is a temptation for the distribution company staff to book more energy in a fallacious manner in the consumption to category which is having free power power and in the domain where your system metering is weak all meters are not working agriculture consumption is not metered so you overbook in those categories and you hide your inefficiencies that is one of the biggest problem of if you do free because you don’t have to collect revenue and you don’t have to show second is this if you don’t pay subsidies in time and free power hits you very badly and you are in a perpetual cycle of cash imbalance with the distribution company they can’t buy power and there’s another big problem is the wasteful consumption because free power means there’s the whole basis of energy efficiency and energy conservation has been taken away so nobody will buy an efficient appliance nobody will switch off your power in the house so this if you wasteful consumption will make you buy more power from say short term markets and all the cost of supply will go up so free power say unbuildable free power will play havoc with your energy accounting your energy efficiency and your financial management so my personal view is that I will never recommend free power you must charge something from that household if you want to help that poor household pay him directly say whatever you want to say assist him 200 rupees a month pay him directly but don’t don’t take away this discipline of energy efficiency proper metering proper billing and payment of subsidy accounting so I could not understand your one small part that why not every section getting free power

Shreya Jai: I’m talking about the sections in the society which might given I’ll just try to rephrase it I’m talking about a section of the society which ideally should deserve cheaper electricity we’re talking about rural agriculture population and section of population in urban areas who ideally as per the social structure should be getting electricity at a cheaper rate is it wrong and why should they not and is there a solution to balance this social economic imbalance

Alok Kumar: there is a concept of lifetime consumption for households so if you read nationalistic policy normally they say if household is consuming like 30 units a month or at the most 50 units a month that type of household can be given say nearly free power maybe or maybe one fourth the tariff and all those are the normally the norm for giving free power and similarly agricultural there is another problem if you give free power it leads to a lot of wasteful say pumping of water and water resources so better will be to give them some direct subsidy but the way we are living in I think heavily subsidized electricity in a limited manner can be given to say small and marginal farmers and households who have a life length consumption like 50 units a month or maybe you can go to 60-70 units a month they should be given and all other households should be given maybe in a slab say slightly cheaper rate for higher consumption but after a stage should be full cost supply if you want to help that household there are other ways to help them directly.

Shreya Jai: got it and let’s stay on this topic of electricity demand demand is shooting to the roof we have crossed all historical records but electricity access has improved clearly through all the schemes that you have talked about over the years 24-7 or round-the-clock electricity remains elusive it has the beleaguered conditions of discom played a role in you know keeping supply and demand situation muted in the country do you think so

Alok Kumar: demand is to be seen in two ways the total demand and the unmet demand or demand what you make so the demand intrinsic demand by the consumers is one which is going to rise and which is rising on various accounts and I will say the there are very clearly three factors which are leading to higher demand which will keep pressure on higher demand first is the our organization and the demand for space cooling the air conditioning demand from that will be a major major major factor second is India is pushing and it should push the industrialization manufacturing activity the share of manufacturing growing GDP may be stagnant and may be same but overall the reports which are coming industrial consumption is going down and thirdly you have connected millions of households in rural areas so they are now in the process of buying new appliances and new comforts the gadgets and houses so these are three things these drivers will will say always keep the demand under pressure it will grow now what is the impact of the say weak financial position of discounts on the supply and demand so supply the has improved you know even the data by any measure the if you go to towns say in UP also or in any other town you will find that the type of outages used to have seven eight hours ten hours they are not there they may be one hour or two hours even those are not acceptable I’m not I’m not justifying them so shortages have come down but and in large part of India also for rural households supply has really improved like in Gujarat and Harana and all they are close to 22 hours some states like they are still at 18-19 hours supply has improved but of course yes if your distribution company is loss making there will have two very clear impact first they will like to prioritize the supply to the areas from where they are able to get revenue collect revenue they will supply on priority first to towns or industrial areas and all and willingly informally formally they will roaster supply to the losing areas like rural areas and all so that is one of the consequence even a household which wants electricity and is willing to pay will not get electricity because the system they will work is a substation or a subdivision losing roasting will happen that is one second thing is because of losses if your cash flow is not does not permit to purchase of power or procure capacity overall power availability will also be affected by weaker position so it will have impact it is showing impact if you see states like like Gujarat and Hrana they their discounts are not loss making in fact their ACS error gap is positive they are earning more on every unit than the cost their supply situation is definitely better both in urban rural areas it does make a difference and the rural area most will suffer more and it leads to a lot of problems for consumers like your your DG sets and pollution and one more aspect important if your liability is poor your industries will be tempted to set up captive power plants and DISCOM will not be able to meet the demand which is a paying demand so it will further worsen the position of distribution company so it does make impact and no doubt and it should be the priority area too

Shreya Jai: and and if we can discuss also the aspect of infrastructure creation a financially ailing DISCOMs would also fall short of creating infrastructure or modernizing its supply grid as well can can you talk about that as well

Alok Kumar: Shreya, I think, thank you very much because I had so many points in my mind so I think that that I did not include that in the list and that is very important so thanks for bringing it to the table, that case when you don’t have money you want to buy power where is the money to upgrade system or augment system and I have come from UP Carter so I have only those examples so it should not be taking something against UP like even the paying area like Noida and Gadjabad they are struggling to upgrade the system those are paying areas consumers can pay but utilities don’t have money to spare to upgrade their transformers their underground cables and all so it does affect the the capability of system to supply reliable power so it is a direct consequence of the weaker financial position and that’s that’s a very valid point yeah I totally agree

Shreya Jai: you earlier mentioned and we’d like to discuss it more now that the bailout schemes did not work as they were intended and I would like to talk about Uday which when it was launched was all encompassing it was giving discomps a financial bailout it was pushing for structural reforms in their operations it was a keratinistic approach which at that time looked very prudent but somehow it did not have the results that the center maybe intended it to have so what were the shortfalls and what were the lessons that were learned especially for the discomps to you know cope with them or include them in their policies going forward.


Alok Kumar: I will say two things maybe it’s a repetition but Uday was eclipsed to some extent by Swabhagya it came in between I said you because as principal secretary to UP government in energy but I was working very hard to make Uday work but we were taken by storm of Swabhagya and whole focus changed so I’m not that the argument I’m making is not just I’ve I’ve I’ve heard from sir it’s my personal experience number one number two Uday did not insist on audited accounts every year so several states most of the states used to give some data which after three years turned out to be not true so if you have a scheme very well intentioned scheme you shift the focus and you don’t have the rigor of the audited accounts and the consequences it will not work now let me tell you are from RDSS alone might not have worked what has worked with RDSS so far it has been working say to a significant level there are two other say mechanism which are assisting the whole pressure for reforms first is the late payment such as rules which has came which came in 2022 one year after the RDSS are launched the consequence if you don’t pay to the generators and transmitters your power will get curtailed from exchanges and from the interstate grid number one number two there is a bigger carrot that you can borrow 0.5 percent of the state GDP if you adhere to the reforms and also the PFC RSC have been mandated to have an additional potential for discounts so it’s a whole package just one scheme in isolation will not work so you have to push the distribution companies from on many front to be on track and take steps that is my understanding so we have been fortunate for in the last three four years though maybe further progress has not been very fast but apparently things at national level they look on track because of many things going in parallel one more small thing which we don’t talk even media people don’t talk is the fuel and power purchase cost adjustment charge we made it compulsory in the rules in 2022 i believe or 2023 2023 now most of the states have adopted that thing and if you read the news there is some revision of 32 paisa 42 paisa 18 paisa every month so your costs are being recovered concurrently so there are very concerted package of reforms and mechanisms which have which is trying to improve the operational efficiency and financial performance of discounts so let us hope that this pressure say keeps on working so that is a comparison i’m telling you like udai in isolation being at eclipse the sabagya no no insistence of the audited accounts and all it was not it was not whole of the approach but now you have rdss and then flanked by this this lpsc discipline the additional gdp borrowing and then potential norms several things could i think that is the that will my response to your query so yeah no thank you for this comprehensive response do you also think that as you said that you know a lot of things are coming together along with rdss and as a part of the scheme  do you think green energy open access and the push towards buying green more green energy is that also playing a role in it again both yes and no it depends where are you for states like gujarat or tamilnadu or kandataka which are located away from the coal fields it will reduce cost and it is very welcome overall we should go green but for states which are sitting on the coal fields like jharkhand west kundal or uttapradesh their variable charge of the coal waste power is less than the solar power so they will have additional pressure on their cost of purchase of power if they push renewals they are still pushing but we have to find ways in means of say addressing those aspects because a simple cost economics will tell that so they can do it still smartly to some extent but basic economics needs more assistance to these states because their alternative options are cheaper for gujarat it is not available for gujarat coal waste power cold being cold transported to to 2000 kilometers solar is any day anyway cheaper option for tamilandu also so it will depend on the location of situation of a state but by large for agricultural consumption if you generate solar power the day and you supply it i think it will it will always say bring down your costs as far as if you’re supplying the solar agriculture consumption that is a general picture

Shreya Jai: right, what we are not witnessing across several states is tariff revisions which is a part of rdss, you know we we are seeing that states are not adhering to the tariff norms that the central government come out with a lot of states rather than increasing tariff are actually reduced tariff maharashtra recently has announced a 10 percent reduction in tariffs which has come as a surprise to a lot of people do you think it is a problem why is tariff revision not being so why are discoms not so disciplined about tariff revisions.

Alok Kumar:  I will say first tariff revision doesn’t mean the tariff has to increase always because again example like imported coal was say pushed into 2022 and cost is higher next day of course will come down so tariff revision means that you have to scrutinize your costs and if the costs have efficient costs have gone up you have to revise more important is the issue of the tariff order so to my knowledge more and more states are issuing tariff orders every year now now come to the whether tariffs are cost effective or why the tariffs are being brought down say maharashtra has a reason that they are pushing the solar power on a very large scale 16 gigawatt and initial results are very highly encouraging if they succeed in absorbing that power efficiently their all-all power purchase costs are bound to come down if they come down and consumer is entitled to have the lower tariffs similar thing happened with the adani’s distribution company in mumbai in two years ago they announced that we have managed our power purchase cost well we’ll bring down the tariffs so if any state has smartly improved his power purchase costs the consumers are entitled to a revisionary tariff downwards that is one one side of the story but yes other side of the story is also true the many states the regulatory commissions are taking a very purist way that this was the last trajectory i said 10 years ago you have not met i will not allow costs like i will not i will just say have the regulatory assets and all those things are really the ills of power sector and there’s a need to have say more serious engagement with regulatory commissions more serious analysis of the tariff orders in all indian discon association which has a very new organization we have also set up a study in association with rec to look at the tariff orders of seven or eight states and come out what is the policy what the x-ray tells what is the reality whether the disallowing is justified or not we need more engagement more analysis and talk to states talk to regulators but you are right say we should be worried that tariff is is scrutinized every year there is a tariff order which is issued and if their efficient costs are going up tariff should also go up but if your cost can come down tariff should come down i’ll give one more example some of the states they were very say very favorable to mou wood power plants and for their gains and for political reasons they entered into some very very expensive power projects in up also so if you enter those type of power projects and you bind your consumers for the higher cost for next 25 years that is also not fair so equally important is that you must pay attention to the efficient power purchase costs and keep the power purchase cost growth in check but pass on the efficient costs and if fortunately you are able to reduce your power purchase cost there is nothing bad in the revision of tariff downwards it should be cost reflective tariff we are not saying always increasing tariff that is my take on this point.


Shreya Jai:  Got it thanks for that and let me now come to the most interesting part  a question rather which brings a strong opinions from everywhere that is the privatization of power distribution companies or the pppd model that now the government is talking about do you think it is a solution to all the problems of the power distribution sector if yes then why if no then what is the solution because it is really catching up we you talked about up and and thank you for doing that because it is a state which is  in the process of you know going for ppp mode for three of its distribution companies which is a huge state a step for a state like uttar pradesh  can you talk about it

Alok Kumar: Yes i will say the chances of successes are higher in the reforms to privatization that has been the experience so far as you take franchises bivandi you take daily experience you take udisa experience so second time so some franchise some franchises did fail but or by and large wherever prioritization has been done wholeheartedly and is supported it has succeeded because there is a long-term institutional change which has a very strong incentive to keep the entity profitable so privatization is a good solution it has a higher chance of success because as i said earlier the in the government on discomps you always run the risk of regime change or the loss of willpower from the political leadership for expediency so i’ll say else of power sector can be better dealt if you go for privatization but within the government ownership because that will also stay to a large extent for a large number of years in india there are things which we are trying to do but i will yes i’m a votary that i will not say privatization i’ll say private sector participation maybe through franchisee like in razasthan they have a metering billing and collection agency so like in smart metering you are doing ppp through amisp i’ll say larger role of private sector efficiency in the management of distribution segment is recommended and it has a it has a higher chances of success going forward

Shreya Jai: But there is resistance towards this idea whenever a ppp or a franchisee or the word private is mentioned there is an outrage from the side of the discomps that is one part of the story the other is that the private sector itself has been very very selective it is now that the government came up with sent off notices and orders that a private sector company can go in and apply to be the second licensee in a certain geographical area is now that we are seeing some interest but that again it is limited to you know areas which are low hanging fruits mumbai thane pune and others so can you know talk about this conflict why does the government sector think has this image of the private sector and why is india’s private the big private names not interested in power distribution.

Alok Kumar:  I don’t agree with that because if you see the type of consumer mix and ground ground reality in vivandi was no better than any rural area the type of consumer mix and the type of ground reality in the yamna par area of Delhi the bypl was no better than a rural area private sector did succeed so that is a misnomer odisha has privatized mix distribution companies with urban rural it’s a matter of your approach and your faith in the system which are bringing in the opposition comes from western interests say i have no hesitation saying the general perception and it is correctly so the large number of the employees in the electricity companies are making money left and right they are vested interests they will oppose political class will also oppose unless until there is a visionary leader sitting as chief minister who wants to push and then no power minister would like to leave his powers to transfer engineers and to have larger contracts so let us not get swayed by those arguments or those vested interests let us see what is the best for the consumers are not consumers happy in agra are not consumers happy in brp are not coming happy in udisha or vivandi or ajmer they are so this vested interest i think the political leadership wherever is strong has a clear vision can see beyond it so i’ll say there’s no truth in saying that it is selective why did bsa succeeded in the bypl which is a very tough area in the power area so i don’t agree with that approach and these are all apprehensions which are being spread by the vested interest let us try it in an honest manner gold hunter it will succeed

Shreya Jai: I hope you have elied some fear and panic across the stakeholders i’ll you know quickly  move on to what the last segment and this is a latest development that has happened in the power sector the union power ministry has been talking about new financial modes for power distribution sector or the or a state-owned power sector which is that listing or in which for profit making departments of the power sector and state it could be transmission it could be gencos it could be discoms first how prudent do you think that idea is was it long coming and do you think it would be a success if it is taken forward by some states

Alok Kumar: I feel it’s a very good move because the you can see the the benefits of listing in this central government companies ntpc or nhpc and all once you list a company the board governance improves you come into that domain the transparency on the board people will come and say the lenders will say so listing is a very good move and it it as long as the company is government owned if there is a mechanism which brings improvement in board governance and transparency and accountability to because listing is first step later on you can also say do a stake sale so some private investor will come or public hold companies will come or some institutional institutional investor will come it’s a good move we should go for it we should improve the governance of board we should bring more expertise we should have more professional ceos for maybe three-year contract five-year contract so that is a very good move i think it should succeed and we should support it

Shreya Jai: As a concluding note  let me just summarize you said that energy access is something that we have done  the reform schemes are going on rdss is all income passing the government is suggesting financial models there are states going ahead being bold and proposing ppp uttar pradesh being the case in point do you think it is time for india’s power distribution sector to be bold and to experiment across both financial and operational perspective should they do that and if they do then three top things that you think the indian distribution sector should do.

Alok Kumar: I will say first important thing is the improved bidding efficiency through smart metering because my take is that if done properly and honestly it can bring down it can bring down your your commercial losses straight by five percent in two years less than two years that that makes a little there’s already scheme in place being done so top thing is the smart between and building efficiency second thing is the governance improvement in this comp should be bolded step you constitute a board which has external experts you select an md it may be an is officer i’m not against is i was a officer you select an md and then keep him for five years in the discong hold him accountable give him freedom and third thing i’ll say make this confiture ready there is a lot of technology with us now artificial intelligence and digitalization which can help your operational efficiency improvement and also much improved consumer services and also better your load reset and power procurement cost reduction if you do three things first the immediate low-end fruit is smart military billing efficiency improve the governance in the boards of the discounts and third is adopt technology faster and faster to aid to help you in say process improvement that is my take.

Shreya Jai: Thank you, those were great points and overall a wonderful conversation. Thank you so much for talking with us . It was a great conversation. We learned so much and there was so much to unpack but thank you so much for joining.

Alok Kumar: Thank you shreya,  it was a great experience for me also thank you my best wishes thank you 

[Podcast outro]

Thank you for listening to The India Energy Hour! Subscribe to this channel to never miss an update. To drop us a feedback, visit our website or write to us at [email protected]

We are on Twitter. You can follow @tieh_podcast and get in touch with 2 hosts @shreya_jai and @sandeeppaii

[end]