The Hindu Business Line : States warming up to power franchisee model

Models for appointment of franchisees range from the revenue-based to an input-based model, where these players are responsible for revenue collection, operations and maintenance and improvement of services.

Anil Sasi

New Delhi, March 6 While privatisation of utilities in the power distribution sector failed to make much headway, the franchisee model is increasingly emerging as an alternative distribution reform model, with most States warming up to the idea of appointing franchisee within the State Electricity Board (SEB) framework to spruce up efficiency.

A total of 14 States, including major ones such as Uttar Pradesh, Bihar, Orissa, West Bengal, Haryana, Andhra Pradesh, Karnataka and Gujarat, are reported to have appointed franchisees.

Models for appointment of franchisees being followed by utilities in these States range from the revenue-based ones, under which franchisees are entrusted the task of undertaking metering, billing and collection, to an input-based franchisees model, where these players are responsible for revenue collection, operations and maintenance and improvement of services.

Response better this time

As opposed to the lukewarm response to erstwhile privatisation efforts, players including Torrent Power, Crompton Greaves, Indo Asian Fusegear, Tata Power, Kalpataru Power Transmission and Madhucon Projects have thrown their hats in the ring for bagging distribution franchisee contracts on offer in States.

While a handful of distribution zones across Maharashtra and Madhya Pradesh have been handed out smoothly to Torrent, Crompton Greaves and Indo Asian Fusegear, others such as Uttarakhand, Rajasthan, Uttar Pradesh, Madhya Pradesh and Haryana are also eyeing the franchisee route.

“Awarding distribution zones through the franchisee route does not involve the political fallout associated with the privatisation of a state-owned utility since the distribution assets stay under State control, while simultaneously allowing for benefits of private sector efficiency to come in. Also, the opposition from employees towards privatisation is not being experienced in the case of the franchisee model tried out so far,” a Government official said.

High T&D losses

Section 14 of the Electricity Act 2003 provides for appointment of franchisees by distribution licensees to undertake distribution on their behalf. Private franchisees take over distribution assets in an earmarked zone on lease and operate it for a designated period of time fixed in the contract, in lieu of a monthly fee.

The zones being selected by States are ones that are high on consumption and report high transmission and distribution (T&D) losses.

Among the zones offered through the new model so far, Crompton Greaves was awarded three major divisions in Nagpur by the Maharashtra State Electricity Distribution Company (Mahavitaran). The other bidders included Kalpataru Power Transmission, Madhucon Projects, Torrent Power and Tata Power.

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