The way this privatization process was handled is really commendable: Tata Power
- May 24, 2021
Tata Power took over power distribution in Odisha by acquiring erstwhile state government-owned discoms—CESU, NESCO, WESCO and SOUTHCO. Tata Power will now have majority equity stake and management control in these discoms. Sanjay Banga, President—Transmission & Distribution, Tata Power, in conversation with Venugopal Pillai, discusses how Tata Power will meet the challenges of managing a vast consumer base of 9 million that includes a big rural component. Banga is confident that with Tata Power’s vast experience, the four newly-created discoms in Odisha, in the next three years, will be better than any state government power distribution utility.
With so many experiments to privatize power distribution in Odisha having failed, over the past two decades, how confident were you about the joint venture PPP model that ultimately led to Tata Power taking over all four erstwhile discoms – CESU, NESCO, WESCO and SOUTHCO?
The Odisha government first decided to privatize CESU and then they went ahead with the other three discoms – WESCO, NESCO and SOUTHCO. The process took almost three years. Odisha government started this process in 2017 and this finally concluded in 2020, and on June 1, 2020, we took over operations of CESU.
Yes, earlier experiments had failed but I think, the Odisha government took good care of to imbibe the learning that they derived from the previous experience. The RfPs of the four discoms had incorporated this learning, and I feel that this made a big difference.
Could you highlight some aspects of the RfPs?
Two-three points were very interesting and that inspired us (Tata Power) to bid. One is that bidders were given a ten-year tariff trajectory; this removed the regulatory uncertainty. Secondly, the ATC loss level was specified. The Odisha government also gave bidders the liberty to check the data provided in the RfP documents. This was never the case earlier.
When we check this data through our due diligence, we found that the data was more or less correct.
The RfPs were very good, and the base data was correct. They actually incorporated steps to reduce the uncertainties. For instance, though it was specified that existing employees would need to be retained, employee provident fund issues of existing employees were resolved.
In fact, I would like to compliment Odisha Electricity Regulatory Commission (OERC) for this very successful transition. The way this privatization process was handled was very commendable.
The total number of consumers in the four Odisha discoms is around 9 million. It is a big number. What challenges are you envisaging?
We how have around ten months of experience with CESU, the first Odisha discom that we took over in June 2020. The challenges that we have in the remaining three discoms are same as what we had in CESU.
Now what are these challenges? Firstly, defective meters. In CESU, we found that a large number of energy meters were defective and the billing was provisional. On average, 30 per cent billing was provisional. When bills are provisional, consumer doesn’t pay as he does believe in the bill, in the first place!
The second problem that we found in all the discoms is that there was not much resource recruitment. The result of this was that the network suffered heavily. There was no concept of preventive maintenance. Whenever there was an outage, it was attended to but there was no preventive maintenance as such. Network reliability was also very poor.
We started recruitment. Around 400 engineers have been recruited in CESU and similar numbers will be put in each of WESCO, SOUTHCO and NESCO. We are also finalizing contractors for undertaking preventive maintenance.
With Odisha, Tata Power would be encountering a large rural population. Are there any challenges that you anticipate on this count?
Yes, this is the first time that we are experiencing rural population. Delhi, where Tata Power is handling power distribution through Tata Power Delhi Distribution Ltd, is largely urban.
But what we are finding is that even in rural areas, people are willing to pay their electricity bills. That has been our first experience in Odisha. But yes, there are remote areas where there are only 15-20 households. Collecting bills from such remote locations can be challenging. We are innovating by involving self-help groups (SHGs) as we had experimented in the slum (JJ) areas of Delhi. We are also connecting with banks that have branches in such remote areas for bill collection. We are innovating and exploring different collection modes in rural areas.
What about customer support that was allegedly lacking in Odisha?
We are first ensuring reliability of power supply and customer convenience. We have opened six customer care centres in CESU. We have opened call centre companies in WESCO, SOUTHCO and NESCO. All four utilities now have call centres. Whether a customer wants a new connection or there is a bill dispute, there is today a mechanism to address it.
Customer care is the first thing that we will try to address, reliability is another. If we ensure customer convenience and reliability, consumer will pay.
Odisha is naturally predisposed to cyclones that are known to have caused havoc in the power distribution system. Is Tata Power taking any specific preventive measures?
Over the last three months, we have prepared a detailed plan for cyclones as this is a yearly phenomenon in Odisha.
I would like to mention here that we have a big advantage of managing all the four discoms. Now, not all of these are cyclone-prone. Storm-prone areas are mainly in CESU. You also have some in the southern part. But, WESCO and NESCO are generally out of the cyclone purview. Hence, we can deploy more resources and contract labour from one discom to those that need them.
We have prepared a disaster management plan to ensure material availability in potentially affected areas. We are also taking upfront preventive maintenance like trimming trees that are very close to power lines, etc.
We recall that CESU had engaged distribution franchisees (DFs) in some areas? What is going to be their status now that Tata Power has taken over?
When we took over CESU operations, there were two DFs, namely Enzen Global and Fedco. They were controlling almost 50 per cent of CESU area. Their contract was up to June 30, 2020, and we took over on June 1, 2020. Their contracts were terminated. We appointed contractors for maintenance and completely took over operations in the franchisee areas. Now, there is no franchisee.
We expect that existing employees at the four Odisha discoms would be largely from the legacy culture. How are you handling the situation?
The existing employees are knowledgeable but they are not processed-driven. I must say that they have coped up very well and we are now working as a team.
In fact, the four Odisha discoms are running with much less than the optimum number of employees. For example, TPCODL (former CESU) with a command area of 30,000 sqkm has around 5,000 employees. On the other hand, in Delhi, TPDDL has 500 sqkm of area but there are 3,000 employees. So, we actually need more resources in Odisha discoms.
Even the existing resources were not able to perform because material availability was not there neither was there proper training. Besides, there was delay in decision making.
We are trying to emulate the processes that we have in Mumbai and Delhi. In six months, we have implemented ERP systems and new billing systems in Odisha. We have distributed almost 1,500 desktops and laptops. The movement of files is now computerized rather than hard copy-based. These initiatives are making decision-making faster.
What are the current ATC losses in Odisha, and what is your plan of reducing them?
In case of TPCODL, we were given the then latest annual figure of 30.5 per cent for ATC losses. In June 2020 when we took over, the latest annual ATC losses were around 48 per cent, due to the COVID-19 lockdown. We closed FY21 at 29 per cent.
Regulator OERC will fix tariff at 23.7 per cent ATC loss level in FY22. We will have to bring down losses to 23.7 per cent this year (FY22) but we have set a target of 23 per cent.
This is achievable because we have improved collection efficiency to around 90 per cent. This, by itself, will reduce ATC losses. If we are able to replace all defective meters, we can do even better. In the first year, we have replaced 2.6 lakh defective meters in TPCODL, now we are left with 2.5 lakh meters to be replaced. This will be done by March 31, 2022. By the end of this fiscal year, therefore, there will not even a single defective meter in TPCODL.
If we can give correct bills and collect monies from 95 per cent of the consumers, this itself will contribute to bringing down the losses.
What is your capex plans for the four discoms?
As a part of our RfP, we have given a capex around Rs.6,000 crore over the next five years, across all the four discoms. We will be investing around Rs.1,500 crore in TPCODL. Most of this would go towards reliability improvement, loss reduction and technology improvement. We have planned to convert all three-phase meters (HT consumers) into smart meters this fiscal year.
What is the situation with respect to household electrification under the Saubhagya scheme? Are there still households without electricity connection in Odisha?
The Saubhagya scheme has been completed in Odisha. However, we found that around 50,000 connections were not in the billing net; no bills were being generated for these consumer. This issue has now been regularized. Each consumer has a meter and bill are generated for every meter.
Speaking of meters, the only thing, as I mentioned earlier, was that in TPCODL, around 6 lakh energy meters were found defective. In WESCO, around 2.5 lakh meters were defective. Defective meters across the state will be replaced this year. In this way, we will ensure that the provisional billing that takes place today to the extent of 30-35 per cent (of consumers), will come down to less than 5 per cent.
On the policy front, what is your view on involving private sector enterprise through the asset-light distribution franchisee model?
I think that the distribution franchisee (DF) model is not the right kind of model, for privatization. The franchisee does not have ownership and there is no regulatory oversight. In the DF model, the maximum effort is on the collection front; a franchisee would not be interested in capex or technology infusion. The more the DF collects in consumer dues, the more profit the DF makes. In the long run, due to absence of capex, network infrastructure suffers. Also employees of the existing state power distribution utility do not come under his portfolio; he brings his own employees. Customer does not get benefited, only the utility gets benefited because revenues increase. However, this benefit is more on the short-term basis.
Tata Power has successfully turned around power distribution in Delhi. How do you plan to use this rich experience to Odisha’s benefit?
The experience would be very, very useful, I would say. In fact, 200 engineers from TPDDL have already moved from TPDDL to the four Odisha discoms. Our experience in collection in slum areas through social innovation in Delhi would be very helpful in Odisha.
Even our CSR activities in Delhi would be helpful. In Delhi, we first improved the general conditions in slum areas, and only then focused on revenue collection. Our experience says that once you involve yourself with society, when you think and work towards progress of society, the society pays back.
Also, the technology that we have used in TPDDL and our experience in reducing ATC losses by detecting theft of electricity is definitely going to help us in Odisha. Our teams of TPDDL that have gained experience in data analysis and in enforcement activities, especially with respect to dealing with electricity theft, will be of special importance in Odisha.
Even our experience of how existing (government) employees should be merged with the Tata culture is definitely going to help us in Odisha.
Are you thinking about Smart Grid architecture in Odisha, or is it too early in the day?
No, in fact, we have already started working on smart grid architecture in all four discoms. We have started GIS, SCADA and customer mapping. In next three years, all four discoms will be Smart Grid-compliant.
What is Tata Power’s vision for the four Odisha discoms?
In the next three years, you will see that the four Odisha discoms will be much ahead of all other state government power distribution utilities!
Captions to photographs (in order of appearance):
- Quarterly safety meeting by the CEO and Chief Operation Officer with Divisional and Circle Officers & team, through video conferencing
- On-field safety training programme
- Inauguration of TPODCL’s Master Customer Care Centre at Powerhouse Square, Bhubaneswar
- View of TDCODL’s call centre in Bhubaneswar
