Essel Utilities Distribution Company Ltd, popularly known as Essel Utilities, is part of the multifaceted Essel Group. Essel Utilities provides various utility-based integrated services in various fields including power distribution. In this exclusive exchange with T&D India, Brajesh Singh Bhadauria, CEO, Essel Utilities, gives a detailed account of Essel’s experience in the power distribution sector. Despite the limited success so far, India could do well by pursuing the private distribution franchisee model, strongly feels Bhadauria. An interview by Venugopal Pillai.
We understand that Essel had difficulties in the distribution franchisee (DF) business in Madhya Pradesh. How was the experience?
In just one year of our operations in Ujjain and Sagar, we had managed to reduce the then high ATC losses of around 45-47 per cent to 25-30 per cent. Other than bringing down the losses, we also provided employment to the local population, building efficient teams in these regions. Be that as it may, the environment for DF business is not very lucrative in Madhya Pradesh owing to pressure from different quarters including political, and the reluctance from the consumers to pay electricity bills, despite using power for variety of purposes. For the above mentioned reasons our continuation in the state was untenable. At present we are not operating in any of the three centres– Sagar, Ujjain, and Gwalior—and the matter pertaining to these are currently sub judice.
The relationship between a DF and state discom depends upon a lot of investment. When a private player enters this business, it endeavors to reduce power theft. It works towards reducing distribution losses. This undoubtedly pushes consumers to pay bills. So when we took over the operations and began putting in a mechanism to streamlines things, we faced a lot a resistance from all quarters. The matter also gets embroiled in politics. As you know, electricity and water become major vote planks during elections.
On other hands, the results of initiatives on network improvement, meter replacement, rectification of billing issues take its own time due to legacy issues, public perception and support from administration. Soon after we began our work, state authorities neither cooperated nor supported and instead started finding reasons to terminate the franchisee. Gwalior was not even handed over to us and despite this, they invoked our performance bank guarantees (PBG). The question is: How can PBG be invoked if the performance didn’t start..? We were forced to seek court’s intervention to protect our business interests. Now the matters are impending in Arbitration Tribunal and High Court.
The experience with Nagpur has been highly enriching. We have come a long way, ever since we took over from Spanco.
What has been the experience in Nagpur so far? How has the situation with respect to consumer satisfaction and reduction in commercial losses improved?
The experience with Nagpur has been highly enriching. We have come a long way, ever since we took over from Spanco. Our performance at Nagpur has been one of best by any DF in country despite many operational and systemic challenges. We have not only reduced AT&C losses significantly but also have improved power reliability. Serving 5.6+ lakh households is cumbersome work, particularly when the city has peculiar political, social and demographic constraints. When we took over in 2011, AT&C losses were around 35 per cent which have been reduced to 14.5 per cent in the year 2017-18. our normal meter reading and billing is around 98 per cent—an exceptionally good metric considering that the system is not fully automated.
Few initiatives on customer service front that we have pioneered includes the “No-power complaints through missed call”. Also exclusive partnerships with Paytm etc have been some great tool for us. In a recently concluded survey by pManifiold, SNDL was ranked as best DF on customer service. We are committed to bring in more improvement in our services, and further reduce AT&C losses in the time to come. There are plans and actions in place to increase use of technology to bring in more operational efficiency.
SNDL, Nagpur has been entrusted by Maharashtra State Electricity Distribution Company Ltd (MSEDCL) to ensure qualitative power supply to the consumers in three divisions of Nagpur Urban Zone—Gandhibagh, Civil Lines and Mahal. As a part of Smart Utilities, the company is focused on achieving its mandate of bringing about efficiency in power supply, reduction of losses to optimum levels, and ensuring high level of consumer satisfaction to more than 5.6 lakh households and establishments in DF area. The impetus behind this is the vision of becoming a model DF based on processes and industry best practices with global standards in power distribution.
The DF model enables opportunity to mid-sized private players to enter into power distribution sector but everything comes down to cost recovery mechanism.
Let us come to Bihar. What were the key challenges ahead of Essel when it took over as power distribution franchisee in the Muzaffarpur circle? How has the situation improved ever since?
Providing last mile electricity to every household is always a challenge and a daunting one at that. However, we are honoured to be part of Hon’ble Prime Minister Shri Narendra Modi’s Saubhagya Scheme. As far as Muzaffarpur is concerned it has been a tough one and posed a huge challenge for us when we took over. Before we came in the city was being supplied power for 10-12 hours per day. Taking up the challenge we overhauled the entire power distribution network and started supplying power close to 20 to 22 hours per day.
However, while we have strived to supply electricity to hitherto dark unlit homes, the consumer’s support to us has not been commensurate. People do not pay bills on time, often defaulting on the same. This has led to losses piling up. Every month we incur a loss of close to Rs.10 crore. Then there is the issue of power theft, which is rampant with people using hooks to draw power illegally. This is a huge challenge which can be tackled if we have dedicated ‘Bijli Thana’ for each city which will support immensely for solving power theft cases. Personally, Muzaffarpur gave me great learning on consumer behaviour aspects. Penetrating rural areas has been our biggest challenge, not only from network rollout perspectives but also from the point of view of billing, collection and enforcement.
We feel that the distribution franchisee model has not really taken off in India. What is your view?
I would say that the model took off very well but there are certain bottlenecks, learnings and corrections that need to be taken into consideration. LT-HT ratio, rural-urban consumer mix, quality of existing networks, administrative and political environment are some important aspects that need to be considered.
The DF model enables opportunity to mid-sized private players to enter into power distribution sector but everything comes down to cost recovery mechanism. DF model does not help a private player to recover its additional capital expenditure. They have no control on power tariff and are forced to survive on efficiency-led margins. Operating costs are ever increasing as various activities are outsourced. The resistance by set of consumers (with political and social patronage) is also highly challenging. Private players have their limitations to bring such trespassers under the law. There have been big void as far as police protection, actions on culprits are concerned. At times, few incidents have even led to fatalities. There is an essential need of stringent law for such defaulters. Their credit ratings (CIBIL) should be linked so fear of law is instilled in them. DF’s enforcement teams needs to be given rights and protection and Bijli Thana should be formed, the way Uttar Pradesh has done.
I have strong belief that India needs more DFs. States like UP, Bihar, Odisha who report high power theft and AT&C losses, do essentially need DFs.
What measures would you suggest to revitalize the power distribution sector, which is today the weakest link in the power value chain?
The power sector in the country of late has witnessed considerable improvement. The country has not only seen highest coal production growth in two decades, there has been spurt in generation, transmission and consumption. However distribution system has not seen equivalent improvement and as you mentioned it remains the weakest link in the power value chain with majority of the power distribution companies in the red with creaky infrastructure and unmanageable T&D losses.
Discoms suffer losses primarily due to technical or commercial reasons. These losses may be minimised by using latest technology and modern equipment for transmitting and distributing electricity. Also, there is urgent need to bring in dedicated workforce/talent for this sector. It would be good idea to introduce courses relevant to this sector in higher education system. Theoretical knowledge coupled with practical training will go a long way to attracting talent in this sector. There is also the scope of building/manufacture equipment locally under government of India’s Make in India programme. I have strong belief that India needs more DFs. States like UP, Bihar, Odisha who report high power theft and AT&C losses, do essentially need DFs. A franchisee ensures 100 per cent revenue to state run discom from the very first even whilst the risks and challenges are attributed to DF.