Under the Aatam Nirbhar Bharat announcements, Finance Minister Nirmala Sitharaman on May 16 announced the privatisation of power distribution companies (Discoms) in the Union Territories (UTs) including Jammu & Kashmir amid the Covid-19 crisis. She observed that the performance of power distribution and supply verticals in the country was sub-optimal.

The government is using lockdown as an opportunity to privatize the power departments of union territories bypassing the public opinion and without giving any time to stakeholders to discuss the issue.
Central Government is leveraging its position as the ministry controlling the UTs to straight away take the drastic decision for introducing privatization of the power sector. SBI Capital Markets Ltd has been appointed consultants for Jammu and Kashmir and Ladakh for completing the required groundwork by December.
In the case of J and K because there is no paper detailing how privatization is to be implemented it is clear that workers, employees, and officers would be the worst sufferers with no safeguard or protection of any sort. Privatization of distribution is a major structural change and the government should give in the public domain the action plan particularly regarding the in-service employees and workers presently manning the electricity distribution system.
The Electricity Act 2003 provides that each state must have a state electricity Regulatory Commission (SERC) and in the case of Goa and other UTs a joint electricity regulatory commission (JERC) has been constituted. However, in the case of J and K there is no SERC because the earlier SERC   could not function after 5th August 2019 as the state was converted into UT. The existing JERC presently has jurisdiction over Goa, UT, Chandigarh, and Pondicherry etc. but does not have jurisdiction over J and K.

The Electricity Act 2003 also prescribes that one of the functions of the SERC is to advise the state government on reorganization and restructuring of the electricity industry in the state.
There has been no revision of power tariffs in the last four years. The minimum and maximum tariff in the J and K is far too less as compared to the national average. There is a gap of Rs.2.12 per unit in the average cost of supply and the average cost of realization. Last year tariff petition was filed before SERC for power tariff revision, but that petition became infructuous after SERC was disbanded.

The revenue realization has been the biggest hurdle in the valley and the state used to bear the deficit burdening the economy. The aggregate transmission and commercial (AT&C) losses in the state are 47.85% which shows the hurdles in revenue realization.

The government is currently spending about Rs 21 crore per day on power purchases from power corporations to meet the power demand in Jammu and Kashmir. This is despite the fact that NHPC gives 12% free power
as compensation as well as royalty to J&K since the hydro resources of the state are utilized for power generation. Further J & K has a share of 25% in 600 MW Ranjit Sagar Dam project and the power is supplied at the generation cost. There is a justification to give this free power to private sector distribution licensee since this free power belongs to the home state.
The estimated hydropower potential of J&K is 20,000 Megawatts (MW), of which about 16475 MW have been identified. Out of the identified potential, only 3263 has been exploited. This comprises of 1211.96 MW in the state sector, 2009 MW in the central sector and 42.5 MW in the private sector. Similarly, 168 MW Shahpur Kandi project on Ravi is another joint sector hydro project with Punjab where it has 25% share

With the introduction of private sector distribution licensee it is not known how these joint sector hydro-projects would be implemented on the issue of power-sharing. These issues would not arise if the Discom is a government company.
The central government is grossly misleading the public by saying that the electricity will be cheaper after privatization. Post-privatization the private Discoms are allowed to take a minimum of 16 per cent profit, which would push the power tariff to more than double of the present tariff. The central
government was looking at abolishing the subsidy and cross-subsidy in the supply of electricity as per draft Electricity Amendment bill 2020 made public on April 17 this year. This would make the commodity more expensive for the general consumer categories.
The profit-making concept for private players is directly linked with the tariff enhancement which will in turn directly affect the employees and the general public of J-K which are already living under serious economic distress.
If the licensee tries to reduce the high level of transmission and distribution losses and theft from consumers it would deteriorate the law and order problem and make the entire distribution exercise un-manageable to the point of collapse.

Govt should give details of how the assets to be privatized are to be valued since these assets cannot be handed over to private licensee free of cost.

In absence of SERC no action be taken on the privatization proposal. Instead, the Government should first appoint the SERC and make this body functional. The proposal regarding pension fund trust of employees must be solved or state government should take the responsibility of pension.
Govt should take policy decision that unless the situation is normalised, any move to privatize distribution will certainly fail and collapse. Hence privatization proposals are put on hold and the work of constituting SERC be taken up instead. With the present law and order problem in J&K, it is not the correct occasion to introduce a private distribution licensee.