The distribution sector is now at the cusp of transformation, says official at Tata Power.
India’s plan to provide round-the-clock electricity is likely to open the door for more private investment in the mostly state-controlled distribution business, according to an official at one of the country’s largest power utilities, Tata Power Co.
States will have to open up the distribution businesses to supply reliable electricity to the nearly 25 million new connections added in Prime Minister Narendra Modi’s “Power for All” campaign, Tata Power Delhi Distribution Ltd. Chief Executive Officer Sanjay Banga said.
“The distribution sector is now at the cusp of transformation,” Banga said in an interview in New Delhi last week. “I am expecting very soon, in a year’s time, a push from the central and state governments to involve the private sector in the discom business and we will be playing a very active role as and when the opportunity comes.”
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States have so far been slow to give away control and invite private investments, especially in the rural sector, where low demand and frequent political interference makes supplies a loss-making business. Government reforms, including transferring a bulk of distribution utilities’ debt to states and a sharper focus on enhancing revenue and narrowing losses, is brightening prospects for the power-retail sector, often seen as the weakest link in India’s electricity supply chain.
“Once you connect households, the expectations increase and people want uninterrupted supply,” Banga said. “Until and unless the governments involve private sector participation in whatever form, and bring in efficiencies, discoms’ operations will be unsustainable,” and hinder the supply of round-the-clock power.
Tata power, which generates and distributes power, has bid for a distribution license in the eastern state of Odisha, Banga said. Rivals including Adani Group and CESC Ltd. are also expanding their distribution business. Adani Transmission Ltd. last year completed the acquisition of a distribution business in Mumbai, while CESC has expanded beyond Kolkata, its traditional stronghold. -Bloomberg