Kesco showcases UP power selloff slips

Unbundling the UP State Electricity Board by creating separate companies to run the power sector has not been able to relieve the sector from its earlier shortcomings.

This is borne out by the example of the Kanpur Electricity Supply Co (Kesco), a successor to the Kanpur Electricity Supply Administration (KESA), which has failed to prevent or even improve on its performance. Its aggregate technical and commercial losses have remained around 40 per cent in the past five years.

Consequently, UP's privatisation plans have suffered over the past five years, since January 14, 2000, when the UP State Electricity Board was first unbundled.

This is because of the failure to find a suitable private sector bidder to take over the utility or its various companies. The failure of the private sector to run the utility properly in states like Delhi and Orissa, where privatisation has taken place, also contributed to decline in zeal.

As a result, power engineers have intensified their turf rivalry with the Indian Administrative Service for the control of the electricity sector.

For example, what's significant is the appointment of Arun, an engineer (till now director, distribution, UPPCL) as managing director of Kesco, succeeding an IAS officer. Since the unbundling, Kesco had always had IAS officers as managing director, except in the initial period. However, Arun said this did not mean any change in policy as far as manning various posts were concerned. He said recently three IAS officers and two engineers had been appointed as managing directors of five splinters of the erstwhile UPSEB.

The state has calculated that to privatise the power sector, Rs 15,000 crore will be needed to defray the losses, for which private players will demand compensation. The state has sent the plan to the Centre. UP's power sector is expected to come to a standstill as far as structure of ownership is concerned.

Perhaps due to this change in perception, Kesco has the same chairman as that of the UPPCL. Earlier, Kesco's chairman was the divisional commissioner of Kanpur. "There is a common pool from which we can draw as much power as we need," Arun said. "There is no limit to it," he added.

Kesco is in the doldrums. It is not in a position to supply power regularly. The city has to suffer huge power cuts.

Recently, its two principal clients--Duncan Industries and LML--have shut down.

These were paying standing charges--for Duncan it was Rs 3 crore a month and for LML, Rs 30 lakh, till two months ago. This means a revenue loss of Rs 5 crore. Now, the revenue per month hovers between Rs 30 crore and Rs 35 crore.

The consumption in the city is of about 200 million kwh per month. Although the designated purchase price of power from Kesco is Rs 1.92, the payment made to the utility is at Rs 1.60.

"The method of payment is that whatever we realise, we deduct money for the payment of wages and salaries and a certain percentage of the remaining and the rest is all transferred to the parent company UPPCL," said Arun.