Discom franchisee Fedco banks on multiple business models for growth

In the first 3 years of operating in Odisha, Fedco claims to have cut AT&C loss by 22%

Feedback Energy Distribution Company Ltd (Fedco), a fully-owned subsidiary of Feedback Infra Ltd, is banking on multiple business models to drive its growth across states.

As an electricity distribution franchisee, Fedco has been actively operating in select areas of Odisha from 2012-13.

"For private sector participation, there are five models. States are looking at multiple models for success. We are also open to working with states on different models. For instance, in Odisha, Fedco has the input-based incremental revenue model where we do the investments on the secondary side. In Madhya Pradesh, we have been working on the management-operator model for four-five months. In West Bengal, where we reach out to 1.5 million customers, the government has stuck to the service-operator model, which is a flat margin business," said Devtosh Chaturvedi, managing director of Fedco.

The licensee model, one of the earliest business models in the electricity distribution franchisee realm, has become redundant. Other models include input-based distribution franchisee model, input-based incremental revenue model, input-based calibrated capex (capital expenditure) model, management-operator model, and service-operator model. The models that are in vogue are the ones where the private sector stays away from capex as the government, being already flush with funds, does not look at the private sector for money.

The future of the electricity distribution franchise business is expected to be driven by a new model called 'input-based calibrated capex model'. In this system, a major part of the capex is funded by the government but transparently shared with the distributor franchisee at the time of bidding. The franchisee takes the responsibility of transforming the business, including reducing aggregate technical and commercial (AT&C) loss and increasing reliability and quality of power supply. With the presence of limited private players in the electricity distribution space, new hybrid business models have to take shape, though the management-operator model still holds traction.

Chaturvedi feels the days when private players used to cherry pick their areas of operations are passé. "The private sector should be prepared to get into areas with a mix of rural and urban consumers. In Madhya Pradesh, the area where we operate is predominantly rural," he said.

In the first three years of its operations in Odisha beginning 2012-13, Fedco claimed to have cut the AT&C loss by 22 per cent (from 58 per cent to 36 per cent) at the end of 2016-17. The long-term improvement came on the back of operational efficiency. The AT&C reduction is the second best by any power distribution franchisee after Torrent at Bhiwandi (Maharashtra).

The overall collection by Fedco in the same period doubled from Rs 198 crore to Rs 396 crore. In Odisha, Fedco operates in Khurda, Nayagarh, Puri, and Balugaon divisions, which fall under the Bhubaneswar circle.