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Karnataka plans new formula to privatise power distribution

C. Shivkumar

BANGALORE, Feb. 25

THE State Government is expected to come up with a new proposal to privatise distribution by unbundling the Karnataka Power Transmission Corporation Ltd. (KPTCL).

The sources said that the new proposal now being worked out included blending of some of the low-revenue and high- revenue circles. This was being done in a bid to ensure that the privatisation of all the circles in the State was sufficiently attractive for investment. As an added attraction all the liabilities of these distribution entities would be assumed by the State Government or by the new transmission company.

Sources said the changes were being mooted, since privatising the existing regional business centres, as separate distribution companies would not elicit sufficient private sector response.

The existing straight programme of creation of distribution companies would result in some entities being profitable and the rest of it being loss-making entities. Consequently the only distribution company that is likely to elicit any response from priv ate sector investors is for circles which have a high proportion of high-tension consumers (industrial load), in particular the Bangalore circle.

The State Government has already some reservations on proceeding with the distribution privatisation. This is in the light of the experiences of Orissa, where there have been steep increases in retail tariffs. In fact, at a last meeting of the Infrastruc ture Task Force, the Chief Minister, Mr S. M. Krishna, who also holds the Power portfolio, had indicated that the Orissa model of distribution privatisation would not be replicated in the State.

As a result, some of the primary task of asset separation and valuation of the distribution companies and corporatising have been delayed. As per the original deadline committed, this corporatisation and privatisation efforts should have begun by now.

The delays now mean the privatisation efforts of Karnataka would virtually coincide with similar efforts being taken in the neighbouring States of Tamil Nadu, Andhra Pradesh and Maharashtra. In these States also unbundling of distribution is expected to begin around this year itself.

The simultaneous privatisation in all these States, the sources said, resulted in some of the low-revenue circles in Karnataka, especially with circles having a high intensity of low-tension load eliciting very poor private sector response.

Besides, the privatisation scheme in all these States would also result in realisation of low value for the disinvestment in the distribution circles in Karnataka. The primary reason being that in at least two States, Tamil Nadu and Maharashtra, the mix of high-tension and low-tension consumers was almost equitable in all the circles.

In Karnataka, almost 70 per cent of high-tension consumers are concentrated in the Bangalore zone itself.

Also, there has already been a flight of consumers from the grid after a series of tariff hikes of over 200 MW. The sops to these customers offered by the State Government to return to the grid have so far not yielded returns. This is because the lower c ost of captive generation as compared to the grid tariffs. The approximate revenue loss as a result of this exit from the grid was in the region of about Rs 400 crore.