By Bijoy Chandra Jena in Bhubaneswar, September 30, 2018: In 1995, Odisha Reforms Act came in to existence after presidential assent. Before that there were nine committees under the Chairmanship of the Chief Secretary, Govt. of Odisha to deliberate on various aspects of electricity right from generation up to distribution to consumer level. These Committees consisted of domain experts with vast field experience and technical knowledge to deal with the nitty-gritty’s of the subject.

The cost of the entire exercise was funded by DFID (then ODA) as a grant. World Bank provided project related loans to Odisha Power Sector at a cheap rate of interest and the loan was routed through Govt. of India which on lent the loan amount to GRIDCO with a higher rate of interest of 13%. The restructuring exercise has its origins in a $350-million World Bank Power Sector loan negotiated by the Government of Odisha and counter-guaranteed by the Government of India.

The loan came with stringent conditions. These included splitting up of the Odisha State Electricity Board (OSEB) into units handling generation, transmission and distribution. Each of them was to undergo a process of corporatisation, commercialisation and eventual privatisation. At the GRIDCO level a project steering committee was formed with all the Directors of the board, DFID and World Bank officials.

At that time from the State Govt. side Secretary-Finance, Secretary-Industries, Secretary-Public Enterprises, Secretary-Energy were in the GRIDCO Board in addition to the Whole Time Directors viz. Chairman, GRIDCO, Director Finance, Director Transmission, Director Distribution, Director HR and three numbers of Non-Executive Directors.

The Odisha Electricity Reform Act took effect on April 1, 1996. Under this Act, the OSEB was divided into the Odisha Hydro Power Corporation (OHPC) and GRIDCO. The OHPC inherited the assets and liabilities of the hydro generation units of the erstwhile OSEB and State Govt. while GRIDCO inherited the transmission and distribution networks along with their liabilities.

Four distribution companies were formed viz. CESCO, NESCO, SOUTHCO & WESCO as wholly owned subsidiary companies of GRIDCO. Subsequently these four companies were privatized by selling 51% of equity through an international competitive bidding. BSES, Mumbai took over three companies viz. SOUTHCO, NESCO, WESCO. CESCO was finally handed over AES which started operating from 01.09.1999. The present structure of the Power Sector in Odisha looks as below;

The Reform in the Power Sector envisaged a number of milestones to be achieved as mentioned below;
A. Operational Improvement

• Improve quality of service to consumers
• Improve operational efficiency and reduce losses
• Mobilize professional skills

B. Financial Benefits

• Attract private investors into distribution business
• Reduce the need for Govt. funding of the electricity sector
• Contribute to increased economic growth in Odisha

C. Employee Consideration

• Create opportunities for secure and increasingly rewarding employment for qualified personnel
• Provide a stable environment for employees

D. Sale of all four zones to promote competition

• The sector also faced severe setback due to the following reasons:-

 Upvaluation of assets
 Under estimation of loss levels
 Non-maturing of anticipated industrial loads
 Withdrawal of subsidy by the State Govt.
 All the past liabilities assigned to GRIDCO

• The balance upvalued amount was assigned as the State Govt. loan to OHPC & GRIDCO.
• All the loans and liabilities of erstwhile OSEB were also transferred to GRIDCO.
• In 1998-99, i.e. two years after the unbundling, it was found that load growth was not commensurate with the SAR projections
• Unfortunately, in October 1999 the State was ravaged by two cyclones one on 17.10.1999 in Southern area and one super cyclone in the coastal belt of the State on 29th and 30th October 1999.
• According to the World Bank conducted survey the asset loss was 372.23 cr.
• Had it been OSEB, the entire damage to the asset would have been restored by the State Govt.

A number of issues as per the SAR to be addressed were not done. They are;

a. Assigning the long term PPAs executed during OSEB period, now being operated by GRIDCO to distribution companies so that they can purchase least cost power in merit order so that the overall retail tariff is affordable.
b. Preparation of optimal manpower requirement structures to take up new construction work and operation & maintenance of lines and substations.
c. Preparation of rules & regulations for recruitment, and promotion of employees.
d. The distribution companies need to be headed by professionals who can deliver.

Today when we introspect we find that the structure of OSEB prior to reforms is back in Odisha. The management of CESCO was abandoned by AES. The commission appointed as administrator to manage the affairs of the Utility and subsequently the commission appointed a management board for the operation of the utility. M/s. BSES had taken over the majority shares of NESCO, WESCO and SOUTHCO from 01.04.1999. Subsequently M/s. Reliance Infra purchased the shares from M/s. BSES and operated the companies.

The Odisha Electricity Regulatory Commission through a judicial proceeding revoked the license of Reliance and vested the management of the three companies with GRIDCO. M/s. Reliance has appealed to the Tribunal against the revocation order which is pending for disposal.

The Odisha Reforms seems to have lost direction over a period of time. The distribution loss has not come down to desired level and remains almost at 40%. The distribution loss at LT level may be as high as 70% which was revealed during random checks in various distribution substations. Therefore the loss level remains as elusive as before because the actual consumption at the LT level are not correctly recorded.

The state is losing roughly around Rs 2000 crore annually because of 25% additional loss over the permissible limit of 15%. At present the meter reading is being done manually through meter readers which are subject to wrong meter reading or manipulation. The answer to this issue is to install smart meters which can be remotely read and operated, so that we get dependable consumption figures. The franchisees of CESU area were mandated to install these meters, besides other functions. If this loss could be reduced, the financial health of the utilities will improve and tariff will also go down.

In view of the fact stated above it is necessary to set up a committee to review the achievements of reforms so far and how to go about it in the future years to come. The DFID and World Bank who are otherwise assisting the State Govt. in other sectors may be requested to make a comprehensive study of the Power Sector Reforms introduced by them way back in 1990s.

In the meantime about 25 years passed and it is high time to revisit the various measures taken in the past and more importantly what needs to be done in the short term and long term to turn the sector around for the benefit of the consumers of the state. They will be willing to take up such review since data from other states and central sector are now abundantly available.

• Former Chairman, CESU, Member, OERC, CMD, GRIDCO, Chairman, EREB (Now EPRC), MD, OPGC

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