Privatisation of UT discoms in the slow lane

Plans to privatise loss-making state-run electricity entities (discoms) are being hamstrung by political and legal hurdles, even as they continue to be a drain on the exchequer and a burden on the taxpayer.

Although the Centre announced a plan to privatise discoms by putting on the block all the six discoms in union territories (UTs) in May last year as part of the Atmanirbhar package, only two of them have called for bids so far – Chandigarh and Dadra and Nagar Haveli & Daman and Diu (DNHDD). And the sale of the Chandigarh discom is impended by a stay order by the Punjab and Haryana High Court.

The target was to privatise all UT discoms by January 2021. Of course, unless the state governments pitch in, privatisation of the discoms owned and governed by them will remain an unfulfilled task.

The two UT discoms that have floated the tenders are seen to be the “lowest hanging fruit” among all the UTs, thanks to their low levels of aggregate technical and commercial (AT&C) losses, against the national average of 26%. While Chandigarh consumes around 1,600 million units (MUs) in a year, DNHDD uses around 9,000 MUs.

More than 50% of the demand comes from industrial and commercial consumers in Chandigarh and for DNHDD, these segments comprise 90% of sales, reducing concerns about timely receipt of subsidies from the government. The electricity department of Puducherry, which caters to annual electricity demand of 2,800 MUs, 65% of which is from industrial and commercial users, is expected to be the next entity to open bids for privatisation, government sources said.

The progress for privatisation has been the slowest in the UTs of Jammu Kashmir and Ladakh, which are mired with security issues and high level of losses.

financial express
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