Privatisation of DISCOMs: A Solution to the Power Sector Crisis?

In India, the power sector is dominated by State Electricity Boards (SEBs) and State Distribution Companies (DISCOMs). However, the financial and operational performance of these entities has been a cause of concern for years. Despite several measures taken by the government to revive the sector, the DISCOMs continue to face financial losses and operational inefficiencies. One possible solution to this problem is the privatisation of DISCOMs.

There are various models of privatisation that can be adopted, such as Vertically Integrated-Power Department, Transmission Separation-GEDCO (Generation & Distribution Co), Unbundled with Single Public Discoms, and Unbundled with Multiple Public Discoms and/or Private Licensee/Franchisee. Let’s take a closer look at each of these models.

Vertically Integrated-Power Department: Under this model, the power generation, transmission, and distribution functions are integrated under a single government entity. This model is followed in states like Arunachal Pradesh, Himachal Pradesh, and Jammu & Kashmir. While this model has its advantages, such as ease of management, it also has drawbacks, such as lack of accountability and transparency.

Transmission Separation-GEDCO: Under this model, the power transmission function is separated from the generation and distribution functions, which are merged into a single entity. This model is followed in states like Kerala and Chhattisgarh. While this model can improve the efficiency of the distribution function, it may not address the issues related to power generation.

Unbundled with Single Public DISCOMs: Under this model, the DISCOM is unbundled into separate entities for power generation, transmission, and distribution. However, all these entities are owned and managed by the government. This model is followed in states like Bihar and Delhi. While this model can improve the efficiency of the DISCOM, it may not attract private sector participation.

Unbundled with Multiple Public DISCOMs and/or Private Licensee/Franchisee: Under this model, the DISCOM is unbundled into separate entities for power generation, transmission, and distribution. These entities can be owned and managed by the government, private sector players, or a combination of both. This model is followed in states like Andhra Pradesh, Maharashtra, Gujarat, and Uttar Pradesh. While this model can attract private sector participation and improve the efficiency of the DISCOM, it may also lead to issues related to tariff determination and consumer protection.

The privatisation of DISCOMs is a controversial topic, with both supporters and detractors. Supporters argue that privatisation can improve the efficiency of the sector, attract private sector investments, and reduce the burden on the government. Detractors argue that privatisation can lead to higher tariffs, lower quality of service, and job losses. It is important to note that the success of privatisation depends on the regulatory framework, the level of competition, and the accountability and transparency of the entities involved.

In conclusion, the privatisation of DISCOMs can be a possible solution to the financial and operational crisis in the power sector. However, the model of privatisation should be carefully selected based on the specific needs and characteristics of each state. The government should also ensure a robust regulatory framework and a level playing field for all players to ensure that the benefits of privatisation are maximised and the risks are minimised.