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Even as the Odisha government has given a second try at privatisation of the power distribution sector in the State, after the failed attempt in 1999, the Niti Aayog report released today heaped praises on CESU (central electricity supply utility).
As per the Niti Aayog report titled 'Turning Around the Power Distribution Sector', the apex planning body has included the CESU model among the country's top-6 best practices in power distribution sector reform.
Patting the CESU for bringing in a sharp 23 per cent reduction in AT&C losses in a mere 4-year period of 2013-2017, the Niti Aayog has included it among the top power distribution reform models in the country like - New Delhi (TPDDL) private licensee, Haryana, public licensees, Andhra Pradesh, public licensees, Gujarat, public licensees and Manipur, public licensee.
The CESU-Niti: Excerpts From Niti Aayog Report
The privatisation attempt failed when the distribution licensees operating with CESU–AES Corporation and BSES–couldn’t pay their power dues a few years post-operation. The overall AT&C losses remained above 38 per cent, resulting in cumulative losses of over $250 million in 2012–13, the report outlined.
As a consequence, no financial institution lends money to CESU in 2012. In the backdrop of insufficient revenues, CESU then decided to implement the input-based franchisee with incremental revenue sharing (IBF-IRS) model, where the franchisee would infuse the capital required for system upgrades and the incremental revenue generated would be shared between CESU and franchisees in a mutually agreed ratio, the report observed
According to the report, CESU engaged FEDCO as a franchisee in four divisions in 2013. FEDCO achieved an average 23 per cent reduction in AT&C losses between 2013 and 2017. The overall collection doubled in the same period as well. They also managed to bring down the power purchase cost below the revenue collection. FEDCO claims this to be the steepest reduction in AT&C losses achieved in a predominantly rural area.
Significantly, when the Niti Aayog report paints a rosy picture about how CESU's IBF-IRS model was working well. Why then the State government retorted back to the unbundled private licensee model?
As per the State government, the idea was to bring private investment into the distribution sector. Only time will tell, how much private investment has been ploughed into the power distribution sector in the State.
Power Access - A Reality Check
As per the State of Electricity Access in India 2020 report, Odisha is among the top 8 states where daily power cuts are high. The report details are below.
• In rural Odisha, daily power cuts in 2020 were in the range of around 6 hours
• While the daily power cut in urban areas hovered between 1-2 hrs.
In contrast, Delhi and Gujarat, where the distribution sector reform has also been carried out like Odisha, ensured 24X7 hours of power supply in urban areas. And less than an hour daily power cut in rural areas. While in Delhi, it's the unbundled private licensee model, it's the unbundled public licensee model in Gujarat.
