Collapse of power reform experiment? Anil Ambani-owned cos' license cancelled in Odisha

Anil Ambani

A major experiment in “power reforms” by handing over the electricity distribution to the private sector has collapsed. In a recent order, the Odisha Electricity Regulatory Commission (OERC) has not only canceled the license to three power distribution companies given in 1999 and owned by Prime Minister Narendra Modi-favourite Anil Ambani's Reliance Infrastructure. It has asked asked the Odisha government to “take over” all three companies.
The OECR canceled the licenses of Southern Electricity Supply Company of Odisha L (Southco), North Eastern Electricity Supply Company of Odisha (Nesco) and Western Electricity Supply Company of Odisha (Wesco) – whose 51 per cent shareholding is with Reliance  Infrastructure.. “Unsatisfactory performance by Reliance" was cited as the main reason for canceling the license.
Power experts have called the order “historic” as Reliance was the first private distribution company in the name of reform to take control of power distribution companies in India.
“Over the years Reliance did not get the tariff revisions it asked for from year to year and had to Appeal to Appellate Tribunal for Electricity (ATE) against OERC orders. ATE orders too were ignored by OERC and ATE accused OERC of 'total lack of judicial approach' insubordination, incompetence and impertinence”, a senior power expert said.
The expert has added, “OERC is currently sitting on a tariff revision petition for financial year 2015-16, wherein its choice is either to execute ATE's orders or axe the licensee blaming them on non performance. OERC chose the obvious and revoked Reliance license bringing down the first initiative of power distribution reforms in the country.”
In its order OERC claimed, the distribution loss had become “uncontrollable due to inefficiency of the licensees”, adding, there was no justification for a “financial relief of approximately Rs 4200 crore to pay off cumulative losses and pay off all the liabilities.”
It added, the billing efficiency of Wesco was 41%, of Southco 54%, and of Nesco 49% at the end of 2013-14. The result was, accumulated losses of Wesco were Rs 715.62 crore, of Southco Rs 802.30 crore, and of Nelco Rs 906.31 (2012-13).
OERC said, “One of the major objectives of the privatisation of distribution business is to run it in a viable, efficient and commercially sustainable manner. It was expected and rightly so that a private investor should be able to infuse capital to make necessary investment in network so as to reduce transmission and distribution loss.”
“It was also expected that the efforts should be made to ensure that every end user of electricity pays for it”, the order said. Yet, the distribution companies, which were in business since April 1, 1999, even after 15 years of operation “have consistently failed to run the enterprise in a commercially sustainable manner”, the regulator said.
“The main reason is the total inability to realise costs from end users and reduce distribution loss by making necessary investment and initiating administrative reforms. instead of reducing loss gradually over a period of nine years the loss has remained more or less constant and in some years it has increased and thus there has been no improvement”, it added.
Ordering handing over the management of the three companies to the Odisha government-owned Grid Corporation of Odisha (Gridco) “in order to ensure the maintenance of continued supply of electricity in the Northern, Western and Southern Zone”, the order said, overall control would be of the principal secretary, department of energy, Government of Odisha.