Here we present the case studies of Andhra Pradesh, Rajasthan and Delhi.
Andhra Pradesh − A Case Study
Andhra Pradesh, one of India’s leading reforming states, has implemented several measures towards fiscal, governance and sectoral reforms. By the late nineties, the state was facing both energy and peak shortages and the quality of power supply had deteriorated; the power utility’s financial losses had grown to about Rs 39 billion and new investments were not coming. The power subsidies had increased to 1.6 per cent of the Gross State Domestic Product (GSDP). A comprehensive programme of power sector reforms was initiated by the GoAP in 1999. The GoAP requested the World Bank for a multi-phased adaptable lending with an indicative financing of US $ 1 billion over a period of eight to ten years to support the implementation of reforms.
Andhra Pradesh − A Case Study
Andhra Pradesh, one of India’s leading reforming states, has implemented several measures towards fiscal, governance and sectoral reforms. By the late nineties, the state was facing both energy and peak shortages and the quality of power supply had deteriorated; the power utility’s financial losses had grown to about Rs 39 billion and new investments were not coming. The power subsidies had increased to 1.6 per cent of the Gross State Domestic Product (GSDP). A comprehensive programme of power sector reforms was initiated by the GoAP in 1999. The GoAP requested the World Bank for a multi-phased adaptable lending with an indicative financing of US $ 1 billion over a period of eight to ten years to support the implementation of reforms.
The programme was designed to be implemented in a phased manner:The reforms process in the state has been reasonably successful in meeting its development objectives to a large extent. The outcome and impact resulting from the project implementation have been significant. The financial performance of the power sector is improving but continues to remain highly vulnerable. Functional unbundling of APSEB has led to its restructuring into six corporatized entities:
• one power generation company (APGENCO);
• one transmission and bulk supply company (APTRANSCO); and
• four distribution companies (Discoms) for retail power supply.There are several areas in which Andhra Pradesh’s power sector has performed well with a positive impact on its finances, supported by the efforts of the government, regulator and utilities. These include:
i)Reduction in cross–subsidy amongst consumer categories, introduction of multi-year tariff incentive scheme and improvement of quality of supply for HT-industrial consumers. These measures have resulted in reversal of the five year trend of declining sales to HT-industries to 26 per cent growth in sales in FY2003.
ii) Reduction in T&D losses from 38 percent in FY1999 to 26 percent in FY2003 through increased investments for augmentation and rehabilitation of the T&D network, control of theft, and better consumer metering. (The progress has marginally exceeded 10.5 percentage point loss reduction target set under the business plan in 1999).
iii) Further improvements in the collection efficiency from 92 percent in FY2000 to 98 percent in FY2003.
iv) Reduction in the costs through financial restructuring and efficient power procurement.
The financial restructuring involved a cleanup of APSEB's balance sheet and restructuring of outstanding liabilities to bring down cash flow in the initial years while postponing the servicing of these liabilities to later years. The GoAP wrote off its Rs 9 billion debt to APSEB against the accumulated losses of APSEB; Rs 28 billion dues for coal and power purchases were converted into medium to long term liabilities by issue of bonds (7 -10 years with 5-8 years moratorium); and Rs 8.3 billion outstanding dues to a financial institution were rescheduled with a repayment relief in the first two years.
Impact of Reforms
The impact of reduction in distribution losses and improvements in metering and collection efficiency is evident from the fact that during the Financial Years 2000-03, the power purchased by the Discoms increased by an average annual compounded growth rate of 2.3 per cent. Their sales increased at a higher rate of about 7 per cent and the revenue by 16 per cent.
Rajasthan − A Case Study
The situation before the reforms is shown in Fig. . You can see that consumers as a group had no representation in this structure. The Government controlled all aspects of the power sector as a monopoly. It set prices, decided upon production, rationing or power cuts, and subsidies. It was only in the wages of employees that a countervailing power existed in the form of unions. Also, since the government owned the electricity board, it could give directions, which the civil servants manning the Board had to follow. The Board could do little other than request the government to infuse funds − even those that were owed to it in the form of payments due. As a result, its operating deficit rose in such a way that the more power it supplied, the greater its losses became. And this became a drag on the state budget.
• one power generation company (APGENCO);
• one transmission and bulk supply company (APTRANSCO); and
• four distribution companies (Discoms) for retail power supply.There are several areas in which Andhra Pradesh’s power sector has performed well with a positive impact on its finances, supported by the efforts of the government, regulator and utilities. These include:
i)Reduction in cross–subsidy amongst consumer categories, introduction of multi-year tariff incentive scheme and improvement of quality of supply for HT-industrial consumers. These measures have resulted in reversal of the five year trend of declining sales to HT-industries to 26 per cent growth in sales in FY2003.
ii) Reduction in T&D losses from 38 percent in FY1999 to 26 percent in FY2003 through increased investments for augmentation and rehabilitation of the T&D network, control of theft, and better consumer metering. (The progress has marginally exceeded 10.5 percentage point loss reduction target set under the business plan in 1999).
iii) Further improvements in the collection efficiency from 92 percent in FY2000 to 98 percent in FY2003.
iv) Reduction in the costs through financial restructuring and efficient power procurement.
The financial restructuring involved a cleanup of APSEB's balance sheet and restructuring of outstanding liabilities to bring down cash flow in the initial years while postponing the servicing of these liabilities to later years. The GoAP wrote off its Rs 9 billion debt to APSEB against the accumulated losses of APSEB; Rs 28 billion dues for coal and power purchases were converted into medium to long term liabilities by issue of bonds (7 -10 years with 5-8 years moratorium); and Rs 8.3 billion outstanding dues to a financial institution were rescheduled with a repayment relief in the first two years.
Impact of Reforms
The impact of reduction in distribution losses and improvements in metering and collection efficiency is evident from the fact that during the Financial Years 2000-03, the power purchased by the Discoms increased by an average annual compounded growth rate of 2.3 per cent. Their sales increased at a higher rate of about 7 per cent and the revenue by 16 per cent.
Rajasthan − A Case Study
The situation before the reforms is shown in Fig. . You can see that consumers as a group had no representation in this structure. The Government controlled all aspects of the power sector as a monopoly. It set prices, decided upon production, rationing or power cuts, and subsidies. It was only in the wages of employees that a countervailing power existed in the form of unions. Also, since the government owned the electricity board, it could give directions, which the civil servants manning the Board had to follow. The Board could do little other than request the government to infuse funds − even those that were owed to it in the form of payments due. As a result, its operating deficit rose in such a way that the more power it supplied, the greater its losses became. And this became a drag on the state budget.
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| The Pre-reforms Status in Rajasthan |
Rajasthan, a predominantly agrarian but dry state was plagued by acute shortages in electricity in the pre-1999 years. There were long hours of scheduled − and unscheduled − power cuts. Power availability declined when demand increased. The government felt that the solution lay in focusing on the generation of power. Power Purchase Agreements to the tune of 2500 MW were signed with private parties. There were high expectations on these private producers which could not be met. The deficit in the sector, in money terms, ballooned.
The Reforms
The Government of Rajasthan went in for a massive programme of power generation in the public sector, investing about Rs. 5000 crore with loans from the Power Finance Corporation. Within 3 years [1999-2003] the power capacity of the state doubled as 1300 MW was added. The state coined a new phrase in project management in India, of "cost and time under-runs". This is a remarkable achievement in India, especially in the public sector.The result was an improved availability of power. Transmission and Distribution losses, which were around 45% in 2000, came down to 39% in 2002. The World Bank provided support to the extent of US$ 180 million by way of reimbursements for technical improvements in the system. The GoR considered this the first instalment of a larger loan it had applied for and planned a multi-year reform programme.
Phases of the Reforms
The reform of the sector consisted of unbundling the Rajasthan State Electricity Board. Generation was separated and made into separate companies, with its own management. A transmission company was formed,to take power from the generator to the load centres. The state was divided into three circles, and three distribution companies were formed. Each was to focus on its operating and financial efficiency. The Rajasthan Electricity Regulatory Commission was set up in January 2000 at the same time as part of this process to look into requests for tariff increases in an open and transparent manner.The State Electricity Board has been unbundled and its activities, assets and liabilities and staff have been transferred to the Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (RRVPNL), Rajasthan Rajya Vidyut Utpadan Nigam Ltd.(RRVUNL), and three distribution companies, i.e. Jaipur Vidyut Vitaran Nigam Ltd.(JAIPUR VVNL), AJMER VVNL and JODHPUR VVNL in July, 2000.
There were plans to privatise the distribution companies in the third phase, but that has not taken place. The Chairman of the transmission company was also the Chairman of the distribution companies, each of which had its own Managing Director. Fig. shows the organisational structure in the post-reforms phase.
The key processes in the power distribution reform process were:
increase in capacity for generation and improvement in plant load factor;
reduction of T & D losses in transmission by investment in new equipment;
reducing corruption in the staff;
prosecuting those caught of power theft;
aligning tariffs with costs in a realistic manner;
reducing subsidies, and where subsidies were to be given, giving them in a transparent manner through the budget process, through the
independent regulatory commission;
bringing in private players into the power sector in all its areas of operation.
The companies were free to approach the Rajasthan Electricity Regulatory Commission for tariff hikes. The process of unbundling was smooth, with no disputes. This was in part because of a carefully worked out plan for the transfer of staff and of assets from the former Electricity Board to the new companies that succeeded it.
Delhi: The NDPL Experience
Soon after starting its operations in July, 2002 in North and North-West Delhi(510 sq. km., 8.5 lakh consumers), a ‘gap analysis’ was made by NDPL in terms of various areas of operation to know consumer expectations vis-à-vis the level of performance at the time of take-over. Consumer touch points were mapped and all the processes were studied to enrich them through BPR(Business Process Re-engineering) activity.
Thorough technical audit of the infrastructure (lines, cables, transformers,switchgear etc.) was carried out with the assistance of OEMs and consultants to arrive on the asset utilization decision based on run, repair and replace. NDPL carries out benchmarking with the best utilities in the world to know(initially, how inferior it was in comparison to them) and how it is improving year by year and bridging the gap.
A central level call centre has been set into operation where any power supply related issue/complaints/grievance is monitored from its inception till closure through a unique ‘SMS-Mobile phone facility’ made available to field staff.Field units have been provided with round the clock fully equipped breakdown vans having on-line communication facilities. Table indicates figures of improvements in this area.Commercial (Metering, Billing, Collection and Tariff Related) Issues All the related processes in RCM (Revenue Cycle Management) areas were re-engineered to suit consumer expectations. Apart from tracking billing errors at the inception stage, the response time to the complaints in these areas was reduced substantially. New connection and meter management groups started functioning in proactive and more consumer-friendly ways, by eliminating the role of middlemen. This resulted in reduction in A T&C losses by over 17%.
It helped ultimately to sustain the 40% rise in bulk power purchase price in the last 2.5 years, with the consumers facing only 8% tariff-hike which is in tune with the inflation rate. A back log of pending 1 lakh commercial complaints,and 20,000 pending new connections at the time of take over was cleared and now these activities are carried well within the prescribed regulatory norms.Activity of up-grading the ‘Consumer care centre’ to world class standards was undertaken and today consumers have started enjoying the facilities. Over 1012 payment gateways are now available for bill payment against 18 at the time of take over.
HR and Training Focus
Changing the mind-set of employees from the arrogance of monopoly status to politeness in competitive business environment continues to be a great challenge. No doubt, consumers have already started feeling a difference,which they are openly communicating, but only persistent efforts can bring such attitudinal changes. An in-house training programme on quality, skills and technical management to focus on consumer satisfaction is conducted to impart at least 4 days training in a year to each employee.
Automation and IT Initiatives
A plan of ‘Automation Road map’ and IT initiatives at Operational, Tactical and Strategic level has been drawn up. This has gradually increased consumer satisfaction by providing reliable power supply with lesser hassles in payment for accurate energy consumption.Installation of the equipments based on latest technologies in the field, automation of grid station operations, use of accurate static meters, reading through HHD (Hand Held Devices) and AMR (Automatic Meter Reading, without a need for the reader to visit consumer premises) are some measures which have enabled consumers to feel a difference. The consumers today can log on to NDPL website and have access to their billing records, consumption patterns, etc. They can print duplicate bills and even make on-line payment.
This is really seen as a delight by many consumers.
Consumer Satisfaction Survey
NDPL adopted a route of getting the consumer satisfaction level survey done at regular intervals through an independent agency of international repute to know the direction in which the company is moving and take measures according to consumers’ expectations. The level of importance attached by the consumer to specific areas of service (power supply position, fault management system, billing and commercial issues, communication, attitudes of employees, etc.) is noted by asking some pointed questions. The performance of the company, as perceived by the consumer, is mapped against each item. This has been found to be a very sensitive and valuable tool to change/shift the priorities of activities to travel further in the direction of consumer satisfaction.
Lessons to be Drawn
With the accelerated pace of reforms, more and more distribution utilities (government companies, joint ventures, private sector) will start playing their roles to upgrade the service level to consumers and bring them more satisfaction and delight. The challenge will become tougher when consumers start acquiring the role of customers with the introduction of more competitive environment through open access and other provisions of the Electricity Act,2003. The executives and other field staff of power utilities (mostly drawn from erstwhile SEBs) need to focus on effectiveness (performance/expectation).Being efficient (output/input) is not enough in a public service utility to have satisfied consumers. Focus needs to be shifted from doing the things rightly to the selection of rights things to do. The approach should shift gears from reactive to proactive commitment to continuous improvement. This is ultimately the key to bring excellence on consumer satisfaction front.
Of course, the Government can play a vital role by giving adequate transitional financial support for initial years of operation to the distribution utilities. NGOs and other consumer protection bodies can play a more participatory role in the regulatory process of annual tariff fixation and educating various consumer groups (farmers, industry, domestic) to help them understand the need to pay the correct price for the service, instead of fighting only to protect their individual interests.
The Reforms
The Government of Rajasthan went in for a massive programme of power generation in the public sector, investing about Rs. 5000 crore with loans from the Power Finance Corporation. Within 3 years [1999-2003] the power capacity of the state doubled as 1300 MW was added. The state coined a new phrase in project management in India, of "cost and time under-runs". This is a remarkable achievement in India, especially in the public sector.The result was an improved availability of power. Transmission and Distribution losses, which were around 45% in 2000, came down to 39% in 2002. The World Bank provided support to the extent of US$ 180 million by way of reimbursements for technical improvements in the system. The GoR considered this the first instalment of a larger loan it had applied for and planned a multi-year reform programme.
Phases of the Reforms
The reform of the sector consisted of unbundling the Rajasthan State Electricity Board. Generation was separated and made into separate companies, with its own management. A transmission company was formed,to take power from the generator to the load centres. The state was divided into three circles, and three distribution companies were formed. Each was to focus on its operating and financial efficiency. The Rajasthan Electricity Regulatory Commission was set up in January 2000 at the same time as part of this process to look into requests for tariff increases in an open and transparent manner.The State Electricity Board has been unbundled and its activities, assets and liabilities and staff have been transferred to the Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (RRVPNL), Rajasthan Rajya Vidyut Utpadan Nigam Ltd.(RRVUNL), and three distribution companies, i.e. Jaipur Vidyut Vitaran Nigam Ltd.(JAIPUR VVNL), AJMER VVNL and JODHPUR VVNL in July, 2000.
There were plans to privatise the distribution companies in the third phase, but that has not taken place. The Chairman of the transmission company was also the Chairman of the distribution companies, each of which had its own Managing Director. Fig. shows the organisational structure in the post-reforms phase.
The key processes in the power distribution reform process were:
increase in capacity for generation and improvement in plant load factor;
reduction of T & D losses in transmission by investment in new equipment;
reducing corruption in the staff;
prosecuting those caught of power theft;
aligning tariffs with costs in a realistic manner;
reducing subsidies, and where subsidies were to be given, giving them in a transparent manner through the budget process, through the
independent regulatory commission;
bringing in private players into the power sector in all its areas of operation.
The companies were free to approach the Rajasthan Electricity Regulatory Commission for tariff hikes. The process of unbundling was smooth, with no disputes. This was in part because of a carefully worked out plan for the transfer of staff and of assets from the former Electricity Board to the new companies that succeeded it.
Delhi: The NDPL Experience
Soon after starting its operations in July, 2002 in North and North-West Delhi(510 sq. km., 8.5 lakh consumers), a ‘gap analysis’ was made by NDPL in terms of various areas of operation to know consumer expectations vis-à-vis the level of performance at the time of take-over. Consumer touch points were mapped and all the processes were studied to enrich them through BPR(Business Process Re-engineering) activity.
Thorough technical audit of the infrastructure (lines, cables, transformers,switchgear etc.) was carried out with the assistance of OEMs and consultants to arrive on the asset utilization decision based on run, repair and replace. NDPL carries out benchmarking with the best utilities in the world to know(initially, how inferior it was in comparison to them) and how it is improving year by year and bridging the gap.
A central level call centre has been set into operation where any power supply related issue/complaints/grievance is monitored from its inception till closure through a unique ‘SMS-Mobile phone facility’ made available to field staff.Field units have been provided with round the clock fully equipped breakdown vans having on-line communication facilities. Table indicates figures of improvements in this area.Commercial (Metering, Billing, Collection and Tariff Related) Issues All the related processes in RCM (Revenue Cycle Management) areas were re-engineered to suit consumer expectations. Apart from tracking billing errors at the inception stage, the response time to the complaints in these areas was reduced substantially. New connection and meter management groups started functioning in proactive and more consumer-friendly ways, by eliminating the role of middlemen. This resulted in reduction in A T&C losses by over 17%.
It helped ultimately to sustain the 40% rise in bulk power purchase price in the last 2.5 years, with the consumers facing only 8% tariff-hike which is in tune with the inflation rate. A back log of pending 1 lakh commercial complaints,and 20,000 pending new connections at the time of take over was cleared and now these activities are carried well within the prescribed regulatory norms.Activity of up-grading the ‘Consumer care centre’ to world class standards was undertaken and today consumers have started enjoying the facilities. Over 1012 payment gateways are now available for bill payment against 18 at the time of take over.
HR and Training Focus
Changing the mind-set of employees from the arrogance of monopoly status to politeness in competitive business environment continues to be a great challenge. No doubt, consumers have already started feeling a difference,which they are openly communicating, but only persistent efforts can bring such attitudinal changes. An in-house training programme on quality, skills and technical management to focus on consumer satisfaction is conducted to impart at least 4 days training in a year to each employee.
Automation and IT Initiatives
A plan of ‘Automation Road map’ and IT initiatives at Operational, Tactical and Strategic level has been drawn up. This has gradually increased consumer satisfaction by providing reliable power supply with lesser hassles in payment for accurate energy consumption.Installation of the equipments based on latest technologies in the field, automation of grid station operations, use of accurate static meters, reading through HHD (Hand Held Devices) and AMR (Automatic Meter Reading, without a need for the reader to visit consumer premises) are some measures which have enabled consumers to feel a difference. The consumers today can log on to NDPL website and have access to their billing records, consumption patterns, etc. They can print duplicate bills and even make on-line payment.
This is really seen as a delight by many consumers.
Consumer Satisfaction Survey
NDPL adopted a route of getting the consumer satisfaction level survey done at regular intervals through an independent agency of international repute to know the direction in which the company is moving and take measures according to consumers’ expectations. The level of importance attached by the consumer to specific areas of service (power supply position, fault management system, billing and commercial issues, communication, attitudes of employees, etc.) is noted by asking some pointed questions. The performance of the company, as perceived by the consumer, is mapped against each item. This has been found to be a very sensitive and valuable tool to change/shift the priorities of activities to travel further in the direction of consumer satisfaction.
Lessons to be Drawn
With the accelerated pace of reforms, more and more distribution utilities (government companies, joint ventures, private sector) will start playing their roles to upgrade the service level to consumers and bring them more satisfaction and delight. The challenge will become tougher when consumers start acquiring the role of customers with the introduction of more competitive environment through open access and other provisions of the Electricity Act,2003. The executives and other field staff of power utilities (mostly drawn from erstwhile SEBs) need to focus on effectiveness (performance/expectation).Being efficient (output/input) is not enough in a public service utility to have satisfied consumers. Focus needs to be shifted from doing the things rightly to the selection of rights things to do. The approach should shift gears from reactive to proactive commitment to continuous improvement. This is ultimately the key to bring excellence on consumer satisfaction front.
Of course, the Government can play a vital role by giving adequate transitional financial support for initial years of operation to the distribution utilities. NGOs and other consumer protection bodies can play a more participatory role in the regulatory process of annual tariff fixation and educating various consumer groups (farmers, industry, domestic) to help them understand the need to pay the correct price for the service, instead of fighting only to protect their individual interests.
Thanks for sharing this Information, Got to learn new things from your Blog on.SAP SF
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