20 yrs of privatised Delhi discoms: Leap in tech but feet tied in populism

A giant step forward in technology, but feet still shackled in populism

At the dawn of this century, the Sheila Dikshit-led Delhi government of the time took the bold decision of privatising the power distribution business in the national capital. A similar model was shaping up only in two other cities — Ahmedabad and Surat. This made the Delhi model the largest and also the most politically sensitive.

During the two decades, Delhi’s electricity sector has never been out of the news. In the initial years, the Bharatiya Janata Party used it to attack Dikshit with charges of crony capitalism, and since 2013, it is a populist tool for the current Aam Aadmi Party (AAP) government. While the electricity infrastructure and supply have seen immense improvement, the shackles of populist electoral promises of free power and regulations supporting them have continued to tie the sector down.

In the middle of this, Delhi’s power distribution companies (discoms) are realigning their focus on technology and newer energy sources to bring down their electricity cost and also ensure seamless supply.

Tech as game changer

On July 1, 2002, the Delhi government awarded two of three regions to private distribution licensees, while the New Delhi Municipal Corporation (NDMC) area remained with the government. Tata Power got the North and Northwest part of the city, while Reliance Infra-promoted BSES Ltd got South, West, East and Central Delhi.

A BSES spokesperson said the AT&C (aggregate technical and commercial) losses had come down to 7 per cent from 55 per cent in 2002. According to industry estimates, the AT&C loss reduction alone fetched Rs 95,000 crore to the Delhi government in this period.

Ganesh Srinivasan, CEO, Tata Power Delhi Distribution Ltd (TPDDL), said there were layers of improvement in the city. “This can be attributed to mainly technological and commercial milestones, consistent investment in network outlay and development of infrastructure and grid modernisation efforts.”

BSES said it upgraded and modernised its distribution network and deployed technologies like (supervisory control and data acquisition (SCADA), geographic information system (GIS), intelligent management system (iOMS) and Distribution Management System (DMS). “We have maintained network reliability of over 99.9 per cent for the last five years,” said a BSES spokesperson.

Similar investment was made by Tata Power, which started with SCADA at 66kv and 33kv levels, then moved to 11kv and now operates at even lower levels. (SCADA is used to remotely monitor and control power demand and supply.)

“The adoption and implementation of smart technologies is the backbone of the company’s network. This has been significant in reducing dependency on manual systems,” Srinivasan said. “It has also helped to cater to load growth, which has nearly doubled over the years.”

While significant investment has happened on the backend, several policy niggles continue to haunt discoms. There are historic and costly power purchase agreements signed in the pre-privatisation era that discoms continue to bear. On top of it, since 2013 the AAP government introduced subsidised electricity. While the government bears the subsidy, the discoms are yet to witness a cost reflective hike in tariff since 2014.

Political and regulatory hiccups

The Arvind Kejriwal-led AAP swept to power in Delhi on the promise of providing free electricity. The subsidy quantum has changed over the years with no increase in power tariff in Delhi since 2014. Currently, domestic consumers who use 200 units a month get 100 per cent subsidy, and there is 50 per cent subsidy for the 201-400-unit slab.

A senior executive said Delhi’s power purchase cost has increased by 300 per cent since 2014 but the tariff has risen by only 90 per cent. The regulatory assets of Delhi’s discoms stand at Rs 51,646 crore as on March 31, 2022. Regulatory assets are discom expenses that are recoverable in future power tariff hikes, but the electricity regulators do not take them into consideration while calculating current electricity tariffs.

“Power purchase cost for Delhi discoms is the highest in the country. While on other fronts there have been improvements, there are questions over the financial aspect — cost that has been incurred over time and how it will recover. A cost-reflective tariff can play an important role in liquidating the regulatory assets,” Srinivasan said.

The way forward

Delhi government-owned power plants are all gas based where the lack of an administered price mechanism leads to an increase in power purchase cost to as high as Rs 20 per unit during peak period.

The Centre recently allowed discoms across the country to exit from power purchase agreements (PPAs) older than 25 years, which are costlier. BSES is in the process of ending the PPA with six thermal power plants — Unchahar, Farakka, Auraiya, Anta, Kahalgaon and Dadri, all of them owned by NTPC Ltd. Cumulatively, these plants supply 800 MW to BSES at an average cost of Rs 6 per unit.

To fill the gap, the discoms are now looking at green energy and demand-side management to reduce their cost. By FY24, BSES intends to have green energy as 50 per cent of its power portfolio. TPDDL said it was looking at “solar + wind + storage” to cover as much of the day with green energy as possible and shut down some of the thermal units.

To ensure smooth transition to green energy and also engage consumers in energy efficiency, BSES and TPDDL are investing in smart meters and demand-side management. TPDDL has already installed 300,000 metres. BSES has recently placed a tender for procuring 5 million meters. TPDDL commissioned South-Asia’s largest grid-scale battery-based Battery Energy Storage System in 2019 and also India’s first grid-connected Community Energy Storage System in 2021.