The termination notice issued to Essel Vidyut Vitaran Private limited (EVVPl) in Ujjain is seen as a major setback for the Distribution Franchisee (DF) model to introduce power distribution reforms not only in the State but across the country.
The DF model for India was proposed by two high level panels — the Task Force on Private Participation in Power Distribution, Secretariat for Infrastructure, Planning Commission, Government of India in 2012 and the Shunglu Committee report in 2011, to encourage private participation in the power sector.
Based on the State Government's drive to privatise public utility services, Pachim Kshetra Vidyut Vitran Company ltd (PKVVCCl), had awarded the work to EVVPl two years ago. However in an abrupt turn of events, it has now issued a termination notice to the company.
The framework of the DF model was proposed by the Task Force as it was shown to address constraints such as political acceptability and resistance against private ownership of public assets while providing advantages like strong incentives to reduce transmission and distribution losses and significant improvement in consumer interface. The DF model was considered for large scale replication in the country by the Task Force since it had made significant contribution towards reduction in losses, improvement in billing and collection efficiency and also improvement in customer support.
In the absence of timely revisions in consumer tariffs, coupled with inadequate reduction in AT&C losses the financial losses of distribution companies have been financed largely by loans from commercial banks. It is with this background that the scope and nature of private participation in power distribution was explored with the objective of harnessing private sector investment and associated efficiencies.