Month: July 2020

On July 31, 1995, mobile telephony began in India at Rs 16.80 a minute peak tariff. Now, most local voice calls are free, a market which has the largest subscriber base in the world after China

1994: NTP allows pvt players in telecom, introduces mobile services. Licences given to firms in four metros

1999: NTP shifts mobile players from fixed licence fee to a revenue-sharing regime

2001: WLL-CDMA allowed

2002: Tariff comes under forbearance. BSNL launches mobile services and Reliance Infocomm CDMA

2004: ‘Calling-party pays’ regime adopted

2006: FDI limit hiked from 49% to 74%

2008: ADC abolished. CDMA players awarded GSM licence and an average of six new operators allowed under first-come-first-served policy

2010: 3G and BWA spectrum auction completed. TATA Docomo launches 3G services

2012: SC cancels 122 licences, Airtel launches 4G LTE services from Kolkata

2013: Unified licensing introduced. Auction of 800 MHz and 1800 Mhz held. FDI increased to 100%

2014: Auction of 1800 and 900 Mhz bands held

2016: Jio launches GSM, makes voice free, pushes data

2017: Jio launches feature phones at rock-bottom price to woo 2G customers

2019: SC directs telcos to pay their AGR dues

2020: Lockdown sees 15% increase in data usage

Source – Business Standard

Let me start with Machiavelli’s quote for the affairs of state “At the beginning, a disease is easy to cure but difficult to diagnose: but as time passes, not having been treated or recognized at the outset, it becomes easy to diagnose but difficult to cure”.

Indian power distribution sector is somewhere in between what Machiavelli mentioned and requires immediate attention. After almost 2 decades of interventions and liquidity infusion, distribution sector will still have an accumulated debt worth INR 4.5 trillion [1]by the end of 2020-21, an increase of 30 per cent over last year. Therefore, it is now clear that the perennial and oldest issue of the financial health of the discoms can’t be solved by usual liquidity support, or possible debt relief. It’s time for real radical reforms in the sector and any delay will only escalate these issues..

It is important to understand that results in any institution are driven by skilled people, robust processes and appropriate technology taken together. An analysis of these three dimensions will always determine the most effective areas for intervention.

Also, unexpected occurrence of Covid – 19 pandemic is a situation for which no one, especially power distribution sector, was ready. The pandemic is causing distress not only due to reduced demand and sales but also because of higher costs for cleaning supplies, health care, testing and temperature checks, personal protection equipment, and supplies to enable employees to work. The pandemic has also increased other costs like uncollectible or bad-debt and associated working capital expense caused by some customers’ inability to pay bills. But at the same time discoms need to modernize and upgrade their infrastructure today more than ever—they need to future-proof themselves and ensure enhanced operational efficiencies and improved resilience.

However, demand uncertainty/softening and weakening finances are likely to impact the discom’s ability to undertake investments in modernization initiatives. Therefore, Government of India’s’ idea of inviting private sector participation to invest and improve distribution sector is an apt step towards structural reforms.

Ministry of Power, Government of India has paved the way for the reforms through electricity amendment bill 2020 and amendments to tariff policy where it was clearly indicated at many instances that reforms to improve the operational efficiency and reduce AT&C losses would entail:

1. Implementation of smart prepaid metering
2. Rationalization of tariffs
3. Reduction in cross subsidies
4. Promotion of open access
5. Direct benefit transfer of subsidies

All the above mentioned reforms could be  derivative of intelligence drawn from the huge amount of timely data collection achieved through smart prepaid metering and its right implementation.

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Full PDF – Smart Metering – An Indian Approach

[1] As per Crisil Ratings report.

The electrifying message of Prime Minister Narendra Modi, of making India USD 5 trillion economy by 2024 definitely propel “current” and contribution of each of 1.2 billion citizens is must . Modi very rightly pointed out that states have to work on good governance and thinking out-of-the-box ideas with innovative service delivery methods will bring much needed results.

With the theme for 2019-20 as ‘Competitiveness of India Inc – India@75: Forging Ahead’, power is the bedrock of India’s economic growth and prosperity. 

Building electricity infrastructure and providing connections is a one-time effort which was achieved through concerted drives. To achieve near universal electrification, the maximum resources of the state and central governments were deployed, and when needed, deployed at different locations, during different periods of time.

Rs 55,000 crore has gone into creating electricity infrastructure and providing connections in the last 15 years but power sector availed and especially distribution sector reaped sub optimal benefits from these massive public investment.

The COVID-19 pandemic and subsequent nationwide lock down, has imposed a fresh set of challenges for the sector, particularly to the distribution sector.

Now when almost every household has been connected to grid, it’s very crucial to think, understand and implement the correct steps so that country shall not get into patch work after huge investment.

There are 3 dimensions to improve operational efficiency in any institution, skilled people, effective processes and efficient technology. This is the time to focus on making people good and processes effective to reap the benefit of efficient technology

People Dimension:

1. Employee centric HR policies for discoms officials. Employee centric involves right mapping of key responsibility area and compensation. Focus on regular up-skilling of employees.
2. Longevity of tenure of top/middle management, this will help to improve the ownership and accountability within the system.
3. Change in referring “consumers” (people who use a service) to “customers” (people who pay for receiving a service) will improve the basic psychology.

Process Dimension:

1. Improve the processes towards achievement of core business objective and setting up accountability.
2. Develop efficient procurement strategies and models:
   1. Vendor to Partner: Transition from fundamental thought process of considering supplier not as a vendor but as a partner.
   2. Individual Tenders to Turnkey Tender: ICT has connected everything and electrical system is no away. Therefore, systems approach is vital to maximizing customer return on investment. This brings to the concept of one turnkey project tenders rather than individual product tenders. Breaking one system into pieces will definitely lead to less costly products but efficient and effective output will always remain questionable. Country has already experienced the same in past.  
   3. Break the concept of L1: Focus on meeting the project objectives and also give roadmap to innovation which is very difficult to come with fundamentals of lowest bidder. Therefore, develop a robust framework for procurement to ensure cost effective high quality products while considering lifecycle investment.
   4. Customer (Consumer) Centric Policies: Process to ensure effective and transparent disbursement of electricity subsidy to farmers like Direct Benefit Transfer (DBT). Bring in more awareness about Standards of Performance (SoP) regulations, this will help to improve trust and confidence on Discoms.

Technology Dimension:

1. Technology is an enabler and will empower both people and process dimensions to reach their respective summit in improving overall health of the discoms, therefore Selection and deployment of right (यथा योग्य) technology is utmost important for maximizing operational efficiency of Discoms. Investing in basic prepayment functions will help discoms to improve the collection efficiency. Communication technology is one of the most evolving field and its effectiveness and efficiency depends on kind of project, demographical landscape, sociology and geographical area, therefore testing and research would be required before opting for one.
2. Develop mobile and web applications to help in keeping consumers informed about their consumption patterns, bill payment details, outage schedules, emergency contacts, energy efficiency measures, and where to lodge complaints etc.
3. Leverage financial technology like payment gateways, mobile wallets and mobile banking to pay bills anytime from anywhere.
4. Develop publicly available knowledge bank where experiences and learning can be collated for others. A standardized framework can be developed, answering WHY, WHAT and HOW of the project like technology used, objectives achieved, geographical area catered etc. 
5. Measurement and improvement in power quality is the next step after 100% electrification. It needs focused & considerable efforts as ensuring quality of supply is a long-term commitment and not one time job.

It is well established that till the power distribution sector improves, upstream investments will not lead to reliable and quality power supply. Also, The financial state of this industry is such that unless urgent action is taken, the nation’s banking sector too would need a huge bailout from taxpayers’ money.

Electricity is one of the drivers for India’s dream to $ 5 trillion economy and we need to focus on granular monitoring, high-quality supply, better customer service and greater revenue realization at the household level and only such a comprehensive effort will ensure that India move towards financially strong discoms which further lead to overall betterment of sector and support to fulfill the dream.