Financial Express printed the interview with Sh. R.K. Singh Minster of Power on 08/3/2021 (copy at Annexure) some points of the interview (statements of Sh. R.K. Singh) are examined as under.

1.         In earlier discussion / meeting of All India Power Engineers' Federation with Minster of Power (Sh. R.K. Singh), AIPEF had expressed its objections that while Govt. of India is pursuing policy of privatise Discoms or to privatise selected areas it would lead to “cherry picking” and state discoms would lose high cause the already over stressed financial position to further determinate leading to financial collapse.

            The Ministry of Power had made a categorical assertion that there would be no cherry picking by private players.

1.1       In Financial Express article of 08/3/2021, the following statement of Sh. R.K. Singh has been quoted

            “Also to prevent new players from cherry picking policy lucrative supply circles the states will have to create a cross subsidy fund” so that Discoms do not get undue advantages owning to higher composition of industrial and commercial consumers in their respective areas, sing said”.

1.2       The above quotation of Sh. R.K. Singh does not represent the issues correctly. All India Power Engineers' Federation had earlier represented to Ministry of Power that if private players are allowed to come as multiple supply licensees, the private licensees will cherry pick  the high revenue industrial and commercial consumers which would unbalance the finances of state discom that would have to service agricultural and domestic consumers where tariffs are low i.e. much lower that average purchase cost, thereby causing the state discoms to go bankrupt.

1.3       The real issue is therefore that the cherry picking by the private players, the Discoms would be at huge disadvantage financially. Minster/ Power is incorrect in making statement that discoms will get undue advantage by cherry picking. In fact the real position would be opposite of what Minster of Power has stated.

2.         To illustrate the issue of cherry picking, two recent examples are quoted as under.

a)        In case of Dadra and Nagar Haveli, the UT electricity system is in process of privatisation and recently bidding was completed for sale of 51% equity. The recent tariff order dated 18/5/2020 gives the energy sale figures for projection of 20-21 as under in MU.

 

            The data shows that out of total energy sale of 6689.48 MU, the industry category is consuming 6477.69 MU i.e. 96.83% while all the other categories of consumers consume only 3.17%.

            The DNH UT was having % losses of 3.66% (interstate transmission) and 3.85% Distribution, Intrastate.

            With such consumer nix and low loss there was no basis to go for privatisation, particularly as it is extreme case of cherry picking.

b)        In the case of UT Chandigarh the recent tariff order of 19/5/2020 issued by JERC gives the power sale date as under

 

 

 In this case, the following categories would come under cherry picking

 

 

Which is 53% of total

            The “Domestic” category has tariff lower than average cost of supply.

 

Conclusion: While Minster of Power Sh. R.K. Singh had made categorical statement that there would be no cherry picking, practically the case of UT Chandigarh and Dadra Nagar Haveli are classic case of privatizing of areas under cherry picking principle.

Thank You with regards.

 

Sincerely Yours

 

Shailendra Dubey

Chairman