UP govt rolls back decision to privatise power distribution companies

The Uttar Pradesh government has decided to roll back its decision to privatise one of its five power distribution companies (discoms), following the protest by the employees of the power department and discoms.

The members of Power Officers' Association were holding protests in capital city Lucknow for the last two days leading to electricity supply issues in the town. 

In a memorandum signed with the association, the power department and energy minister Shrikant Sharma agreed on "not privatising any discom in the state".

Business Standard has reviewed the memorandum signed on Tuesday.

"The power minister assured that no decision regarding the privatisation of discoms would be taken without taking the employees in confidence. The government is taking back the decision of privatising the Purvanchal discom", said the memorandum signed by the state government and employee associations. 

This paper had reported first in June, UP government was looking to privatise one of its five power distribution companies (discoms) - Purvanchal Vidyut Vitran Nigam Limited (PuVVNL). 

This discom which controls and manages electricity supply in the eastern Uttar Pradesh, has two politically important cities - Varanasi represented by Prime Minister Narendra Modi and Gorakhpur the assembly constituency of chief minister Yogi Adityanath. Senior officials said the power department was planning to offer PUVNNL in order to reduce the losses and improve the supply infrastructure. Varanasi was earlier slated to become the model city for urban power reforms. This included underground cabling, smart metering and IT enabled electricity supply, among others. 

Uttar Pradesh has highest discom losses in the country - both financial and operational. As of March 2020, the total net loss of all the five discoms in the state stood at Rs 819 crore, according to the UDAY portal. The state’s average ‘Aggregate Technical & Commercial (AT&C) losses’ or (power supply loss due to inefficient system) stands at 30 per cent - higher than the national average. Of the five, only Kanpur Electricity Supply Company (KESCO) is making profit. 

According to the memorandum signed on Tuesday, it was also agreed the power department would ensure reduction in losses and improve billing efficiency and revenue collection. 

Currently, only Agra in Uttar Pradesh has a private power distribution franchisee run by Torrent Power. In 2009, KESCO was offered to Torrent Power through a franchisee model. Torrent was supposed to manage the billing, connections and even build additional infrastructure, while KESCO remained the owner. However, Torrent could never make a headway due to repeated protests by opposition parties, employee groups and the deal was cancelled in 2015. 

In 2018, Uttar Pradesh had announced to offer five cities including capital Lucknow and also Varanasi for private distribution franchisee. This also did not take off.