A look at our electricity distribution mess

In the northernmost state of Jammu & Kashmir, 67 units (kilowatt-hours) out of every 100 units of electricity generated are lost in transmission and distribution or T&D. In the hydro-rich Arunachal Pradesh, 48 per cent of energy is lost. Even in the most progressive state of Gujarat, the record is less than desirable. At 23 per cent, its T&D losses are higher than those in Tamil Nadu, Andhra Pradesh and Karnataka.

These are 2009-10 figures Minister of State for Power K.C.Venugopal presented to the Rajya Sabha recently. What they highlight is the creaking distribution network due mainly to worsening finances of electricity distribution companies. While the Shunglu Committee estimates put the loss figures at Rs 57,000 crore in 2010 - up from Rs 17,000 crore in 2006 - many experts think the losses could actually be close to Rs 1 trillion by now. The bitter irony, however, is that the financial losses have ballooned while the T&D losses have actually come down - to be precise, from 32.53 per cent in 2003-04 to 25.39 per cent in 2009-10.

Power pundits are unanimous that the Centre must deal with the issue with a firm hand and fix the distribution sector before it is too late and out of hand. The billions of rupees the private sector has sunk to build generation plants will go in vain unless distribution companies recover. The behemoths such as NTPC too will be left with scarce resources to invest in the sector if the state utilities don't get their act together.

On February 22, Ashok Khurana, a former IAS officer turned spokesman for the power sector, made a presentation before the Prime Minister's office calling for privatisation of distribution utilities and allowing customer migration across utilities. Khurana, who is the Director General of Association of Power Producers, has urged the government to introduce milestone-linked financial support to ensure actual performance improvement.  

The banks have had an unsustainably large exposure to the sector at 16 per cent and the foreign direct investment is pathetic. If banks lend further to the sector, the contagion could spread and engulf the manufacturing sector as well. In this kind of a scenario, at least partial private sector investment in the distribution sector will improve matters, says Kameswara Rao, Executive Director at PwC. He cites the example of Bhiwandi (Maharashtra) where management of distribution by private franchisees has led to about 40 per cent fall in aggregate technical and commercial (AT&C) losses in three years.

According to Rakesh Goyal, Director at the energy consulting firm, Tetra Tech, generation costs are going up owing to the gap in demand and supply of coal and increase in the prices of imported coal. At another level, there is a complete lack of political will to proportionately increase retail tariff. "This has rendered the value chain of the power sector unsustainable," he says. PwC's Rao says the Centre must come up with some kind of a carrot and stick policy to put distribution companies back on track. Warnings such as "No bank loans for no reform" might work, he says.

Investors of all sorts, meanwhile, are keeping a safe distance from power firms.

The T&D losses in India have come down from 32.53 per cent in 2003-04 to 25.39 per cent in 2009-10. Percentage transformation, transmission and distribution losses (including energy unaccounted for)

Region		STATES/UTs	2003-04	2004-05	2005-06	2006-07	2007-08	2008-09	2009-10 #
NR	1	Haryana	32.07	32.11	30.51	33.35	32.83	30.74	31.00
	2	Himachal Pradesh	22.76	28.90	23.55	19.77	16.98	15.51	20.52
	3	Jammu & Kashmir	45.54	41.08	44.93	51.98	55.71	58.02	67.35
	4	Punjab	25.96	25.42	27.56	26.61	22.82	23.08	23.39
	5	Rajasthan	43.74	44.68	39.92	35.60	34.71	31.47	29.99
	6	Uttar Pradesh	35.17	34.39	32.63	33.49	28.60	30.94	33.15
	7	Uttarakhand	49.23	39.30	35.96	34.48	35.66	41.79	25.27
	8	Chandigarh	39.06	30.37	31.64	25.13	23.77	22.36	23.19
	9	Delhi	43.66	45.40	48.61	33.00	28.65	22.22	22.09
WR	1	Gujarat	24.20	30.43	27.91	24.87	26.13	24.07	22.77
	2	Madhya Pradesh	41.44	41.30	40.07	39.24	35.64	38.46	38.32
	3	Chhattisgarh	42.55	28.06	31.06	31.71	29.79	26.38	18.62
	4	Maharashtra	34.12	32.40	31.60	31.64	29.79	23.88	25.16
	5	Goa	45.05	35.97	19.68	20.90	21.18	17.12	16.99
	6	D & n Haveli	15.10	16.00	19.94	11.22	18.10	15.57	11.21
	7	Daman &diu	16.88	15.56	21.58	22.09	23.29	20.06	17.19
SR	1	Andhra Pradesh	27.73	23.96	20.06	18.65	22.41	19.56	18.37
	2	Karnataka	23.29	26.08	29.77	25.91	18.87	17.03	18.76
	3	Kerala	21.63	22.48	23.50	19.11	17.81	13.16	19.59
	4	Tamil Nadu	17.16	19.28	18.66	19.54	18.71	18.14	18.41
	5	Lakshadweep	11.85	10.20	11.19	12.87	18.05	24.87	11.59
	6	Puducherry	11.60	18.15	18.48	18.76	5.89	12.24	11.84
ER	1	Bihar	36.66	38.88	43.96	50.67	48.79	46.37	43.58
	2	Jharkhand	25.35	19.62	26.82	26.21	23.16	24.27	22.24
	3	Orissa	57.09	44.02	45.56	40.86	39.44	42.65	37.00
	4	West Bengal	31.01	28.54	24.84	23.64	21.29	16.79	18.33
	5	A & N Isls.	25.95	12.63	24.32	23.10	26.86	24.16	19.76
	6	Sikkim	54.99	50.49	10.73	26.86	36.80	38.80	39.01
NER	1	Assam	39.31	51.76	40.34	33.69	38.60	37.59	32.82
	2	Manipur	65.18	70.61	63.12	53.47	63.56	63.37	54.66
	3	Meghalaya	16.73	28.35	40.19	35.34	37.62	37.45	39.06
	4	Nagaland	55.00	48.26	58.99	54.79	55.61	58.3	56.91
	5	Tripura	46.44	59.54	41.11	34.75	42.81	35.78	35.55
	6	Arunachal Pradesh	47.54	42.96	49.72	57.79	67.20	46.88	48.04
	7	Mizoram	55.54	66.14	39.19	38.18	44.63	52.70	53.80
All India			32.53	31.25	30.42	28.65	27.20	25.47	25.39

# Provisional ; Source: Ministry of Power