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Power distribution needs more private sector participation

Venugopal Pillai ,  Wednesday, January 23, 2013, 11:15 Hrs  [IST]

Hemant Kanoria— Hemant Kanoria, Chairman, DPSC Ltd

DPSC Ltd (formerly Dishergarh Power Supply Company) is amongst the oldest utility in India, Part of the public sector Andrew Yule Group, DPSCL operated in eastern India. In 2009, DPSC was bought by private sector investors. Hemant Kanoria, in this exclusive interaction with Electrical Monitor, gives a roadmap on how DPSC in the new ownership plans to evolve as an integrated power utility in the generation and distribution sector. An interview by Venugopal Pillai.

Take us through the new ownership structure of DPSC after Orbis Power Venture took over controlling stake.
DPSC was on sale by Andrew Yule back in 2009. SREI in consortium with India Power Corporation Ltd (IPCL) emerged as the highest bidder for a majority stake in DPSC. At present, IPCL holds 93 per cent stake in DPSC. IPCL, in turn, is held by renowned Venture Capital Funds like Infrastructure Project Development Fund and financial institutions like SREI Infrastructure that hold 9 per cent in IPCL.

Tell us how you plan to change the perception of DPSC from a traditional public sector power distribution utility to a more holistic private electricity service provider.
Following its acquisition in 2010, DPSC has ever since been on a growth trajectory implementing modern and efficient ways of operation. Some of the highlighting points are:
Smart Grid metering: The company has initiated Smart Grid development process since last year. In our distribution license area, we have successfully implemented Automated Meter Reading (AMR) that generates consumer meter reading reports and bills, real time with negligible variance in data. This has resulted in savings towards lead time for meter reading and bill generation and also increased the operational efficiency by increasing the accuracy of data. Pursuant to the success of this implementation, we are progressing forward to ensure real time data management and availability at the receiving feeders that will enable T&D loss management, further adding to its operational efficiency.

Low T&D: DPSC, through its efficient power distribution, has maintained one of the lowest T&D loss figure across India. Through our better control systems and regular quality checks we ensure minimum loss. Also, by an extensive augmentation of our existing systems by building new infrastructure, we have been able to keep a consistent check on energy losses through our networks.

Integration Process: In the near future, we would undertake an integration process by the amalgamation of IPCL and DPSC. We believe that this synergistic integration shall result in consolidation of our power businesses into one and we shall emerge as a bigger player in the sector with operations in power generation and distribution. The amalgamation would enable us to have a large asset base, access to better financial resources and will enable us to manage our business more efficiently by effectively pooling the technical, distribution and marketing skills of each other, resulting in an optimal utilization of resources.

What is the status of DPSC’s proposed 540-mw Raghunathpur coal-fired power plant in West Bengal? When do you expect full commercial operations?
At Raghunathpur, we are setting up a 2x270 (540-mw) thermal power plant with an investment of around Rs.3,084 crore. The project has received water allocation for the first phase and other necessary project consents and approvals are also underway. Land acquisition for the project is also on track with significant areas already acquired. However, given the state of the market at present, we are moving forward with care.

What are your eventual plans for the existing 12-mw Dishergarh power plant?
The existing Dishergarh power plant has been completely overhauled through a renovation and modernization exercise. The new plant is undergoing testing and would be commissioned soon. This 12-mw power plant provides system stability to the DPSC grid by acting as a reserve supply source.

DPSCDo you feel that the ongoing controversy regarding coal blocks will affect thermal power capacity addition in the near future?
The last few years have seen significant generation capacity addition being done. However, a lot of these projects are facing adverse issues today due to concerns related to fuel availability. The ongoing controversy related to coal blocks is just one of the many issues related to fuel availability in India. This includes fuel linkages, fuel transportation, quality, prices, etc, for both coal and gas. We believe a fresh look needs to be taken on the entire primary energy supply issue rather than dealing with symptomatic concerns only when crisis erupts.

We perceive that the government’s effort in privatizing of power distribution circles has met with mixed success. What is your view?
While policy level views have been announced on the possibility of private participation in the distribution sector, either through distribution franchisees or public-private partnerships, yet this has only seen some cases being implemented. A complete overhaul of the dynamics of distribution needs to be effected for the sector to be selfsustaining and viable.

Does DPSC plan to bid for circles outside its command area that might come up for privatization?
DPSC Ltd is focused on the development of its distribution business. This includes its licensed area as well as any other opportunities in the distribution space that are available, which utilize DPSC’s core capabilities of providing electricity services to its consumers in the most efficient manner. Any case of privatization would of course be viewed with this lens and any investment decisions of such nature would be seen on a caseto- case basis.

DPSCIn a general sense, much of India’s power sector ambitions rest on private sector participation – in all areas of generation, transmission and distribution. What challenges do you foresee and how can the government play better its role as facilitator?
The power sector’s importance towards the growth of the economy at large cannot be overemphasized. Despite that, it has been facing acute constraints in its development. Some of the bottlenecks that we can perceive, in no particular order, are as follows:
Fuel availability: Coal and gas supply constraints have impacted operational power projects across the country and have created huge obstacles for projects that are under implementation.

Financial health of state power utilities: Huge accumulated losses and a continued resistance to increase tariffs, has created a situation where power at very low prices are available in the power markets and yet load shedding continues in several parts of the country.

Private participation in distribution and open access: Power distribution in India needs infusion of private sector funds and efficiencies to draw it out of a downward spiral of technical and commercial losses, deteriorating network infrastructure and consequent financial ill-health. In addition to this, Open Access needs to be provided in both letter and spirit to users and suppliers across the country so as to instill competitive efficiencies in the sector.

The most important step is to revive the financial health of the sector. This can be done only if power distribution sector becomes more efficient. The participation of private sector is extremely important as both private investments and efficiencies are critical in overhauling the fundamentals of the sector. In addition to that, support by electricity regulatory commissions in ensuring that the sector remains financially viable through appropriate tariff adjustments is vitally important as well.

In its new avatar as a private sector power utility, please summarize your growth plans for DPSC for the coming 3-5 years.
The Group plans an investment of Rs.25,000 crore for a generation capacity of 4,300 mw over the next five years. A 450-mw thermal coal plant in Haldia will be commissioned by 2014 and a 540-mw plant in Raghunathpur would be pursued as per plans. The company has executed MoUs with state governments for setting up generation plants of 1,320 mw in Bihar, 1,320 mw in Gujarat and 660 mw in Madhya Pradesh. The company is achieving statutory approvals for the same and land identification is in process.

To strengthen its distribution network, the company plans to set up 400kV and 220kV substations within the licensed area to provide required connectivity with the national and state grid. It also plans to strengthen the distribution network by augmenting its lines and enhancing its network to provide better services to its consumers. In this segment, the new investment will be around Rs.1,450 crore in the next few years capable to cater to an increasing load growth in the license area.

In addition to this, we would also be participating in other opportunities in the distribution space including distribution franchisees or privatization bids on a case-to-case basis.
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