Private sector participation in India’s power sector has been increasing continuously since the enactment of the Electricity Act, 2003. Ministry of Power’s (MoP) Jyoti Arora, spoke at a recent conference organised by India Infrastructure on the current state of public-private partnerships (PPPs) in the sector and investment opportunities going forward. Excerpts…
Private players currently own and operate 47 per cent of the total installed generation capacity in the country. A significant proportion of this has been developed under the broad PPP framework, wherein concessions are awarded by the government and there is sharing of risks and rewards between the government and the concessionaire. There were some issues raised by private developers with respect to the PPP framework for generation projects, like those with respect to the duration of the concessions. The ministry is currently in the process of revising the standard bidding documents (SBDs) for generation projects.
In transmission, we have been able to create a very robust infrastructure as is evidenced by the single price reported throughout the grid on most days. There is still some congestion in the southern grid but both public sector and PPP projects are under construction to reduce it.
The MoP now has two SBDs for PPPs in transmission – the viability gap funding (VGF) and non-VGF models. We are in the process of revising the SBD for the non-VGF model to address certain issues. A key change pertains to the incorporation of point-of-connection charges. We are also trying to segregate the role of Power Grid Corporation of India Limited to establish a separate grid company and a central transmission utility for independent planning and monitoring.
Regarding the distribution segment, there are two examples of private participation – Delhi and the franchisee model – neither of which falls under even the extended definition of PPP. In the case of Delhi, assets had already been created by the public entity and only efficiency was built in later by the private player. The experience in the case of the franchisee model has been mixed. The model proved to be successful in some areas such as Bhiwandi, Maharashtra, where baseline data was available, proper benchmarking was done and the expected outcomes were clearly defined. However, the model failed to deliver results in other areas, such as Kanpur and Agra in Uttar Pradesh. In Odisha, the same franchisee company is doing better in one district than in another.
As for the future, the central government will continue to award generation capacity through the ultra mega power project scheme. But I think that a major opportunity for private participation lies in the transmission and distribution segments. Documents prepared under the 24×7 Power for All initiative identify an investment requirement of Rs 1,640 billion in the sub-transmission segment (132 kV and above) over the next three to four years. Most of these investments will be made by public sector utilities; however there is a significant opportunity here for private players. We are advocating that states identify big transmission projects for competitive award, so that eligible entities avail of VGF and make tariffs more viable.
Opportunities in the distribution segment also exist in infrastructure development under the 100 Smart Cities Mission. These would be greenfield projects where the PPP framework can be utilised. The MoP wanted to reform the distribution segment by separating carriage and content. However, states are still not politically inclined to give the distribution system to different players. Some of the more progressive states might be willing to do so. As of now, the ministry is looking at increasing the sustainability of the distribution segment through the Ujwal Discom Assurance Yojana.
Overall, I think that for PPPs to be successful we must have a good framework in place. It must be backed by a robust regulatory regime as recommended by the Kelkar Committee as well as the presence of a renegotiation framework.