Hands Off My Discom!
Power Watch India|December 2016

Most people who take an interest in the electricity sector are aware that the discom train has clearly jumped off the rails in a large number of Indian states.

Mohua Mukherjee

Total discom losses amount to nearly 3% of the country’s GDP, despite a series of expensive bailouts in recent years and another one (UDAY) that is currently underway. Why is this so? Who is in charge of the state power sectors, and what (or who?) is holding them back from implementing 20 years’ worth of identical recommendations in consultants’ reports? Over the years, numerous and varied consultants have repeatedly identified very similar, simple and common-sense preliminary actions to reduce losses and embark on a financial recovery strategy, for the majority of discoms. That list includes the following: Create a computerised customer database; implement full metering across the network (at the distribution transformer, at the feeder and at the customer premises); introduce automated meter reading for large consumers, based on the 80-20 principle where 80% of revenues come from 20% of the customers; update billing practices and reduce inconsistencies for small customers to minimise disputes; improve collection practices with relentless focus on customer service and maximise payment convenience; track consumption patterns; carry out GIS based consumer indexing and GIS based electrical network mapping, including early identification of overloading in various key infrastructure elements like distribution transformers and undertake load flow studies for planning the growth and expansion of the network. If discom engineers were permitted to routinely undertake these measures on behalf of the discom’s shareholders and customers, then it is safe to speculate that discoms would be in a far better financial condition than they are today. Monitoring year-on-year performance would become possible and hard-to-ignore red flags would start to appear. So why were these transparency-enhancing actions not taken? And who was responsible for the fact that they were not fully implemented, despite starting with much fan-fare?

Insiders with first-hand information on these matters, who have been at the centre of decision-making circles, point to the long shadow of the state’s political top brass. This shadow reaches right into the offices of the discom boss and the regulator and causes some sort of apparent paralysis. Knowledgeable folks say that for at least four decades, leading state politicians have habitually used the state-owned discom as a “cash cow in the shape of a black box”. Political interference is baked into a discom’s daily routine, and any discom boss apparently needs to keep his political masters happy. Reliable sources have informed that for the state’s top politicians, using the discom as a political patronage ‘ATM’ involves doling out closed-door political favours in the form of electricity freebies to their high (electricity) consuming ‘friends, relatives and cronies’ (FR&Cs). Some of the FR&Cs will of course already be conveniently classified as ‘agricultural consumers’. This means that their vast landholdings and thirsty-crop plantations are already entitled to zero-cost power for irrigation pumps (in many cases the state policy helpfully remains silent on maximum allowable farm size or annual income limits for eligibility to receive free power). Other FR&Cs may be industrialists who are quietly assured of receiving no troublesome electricity bills from the discom, in return for certain quid pro quos. Their electricity accounts are assigned to cooperative discom engineers who survive and thrive because they can read the unwritten rules on the wall. They know that they must implement the will of the top brass of the state, and keep the FR&Cs happy. But if you are going to milk the discom dry, you first need a bucket to carry away the milk—you need to have some container that serves as a good black box.

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