The Hindu Business Line : Franchisee model rekindles pvt interest in power distribution

How it works
Pvt franchisees take over distribution assets in an earmarked zone on lease.
Operate it for a designated time fixed in contract, in lieu of a monthly fee.
States selecting zones high on consumption, and with high T&D losses.

Anil Sasi

New Delhi, Dec. 2The franchisee model mooted by States to rope in private players into the power distribution business, as an alternative to out-and-out privatisation of distribution utilities tried out earlier, is fast catching up as a concept.

As opposed to the lukewarm response to erstwhile privatisation efforts, players including Torrent Power, Crompton Greaves, Indo Asian Fusegear, Tata Power, Kalpataru Power Transmission and Madhucon Projects have thrown their hats in the ring for bagging distribution franchisee contracts on offer in States.

While a handful of distribution zones across Maharashtra and Madhya Pradesh have already been handed out smoothly to Torrent, Crompton Greaves and Indo Asian Fusegear, others such as Uttarakhand, Rajasthan, Uttar Pradesh, Madhya Pradesh and Haryana are also eyeing the franchisee route, Government officials involved in the exercise said.

“Awarding distribution zones through the franchisee route does not involve the political fallout associated with the privatisation of a State-owned utility since the distribution assets stay under State control, while simultaneously allowing for benefits of private sector efficiency to come in.

“Also, the opposition from employees towards privatisation is not being experienced in the case of the franchisee model tried out so far,” a Government official said.

Zone selection

Private franchisees take over distribution assets in an earmarked zone on lease and operate it for a designated period of time fixed in the contract, in lieu of a monthly fee. The zones being selected by States are ones that are high on consumption and report high transmission and distribution (T&D) losses.

Among the zones offered through the new model so far, Crompton Greaves was awarded three major divisions in Nagpur by the Maharashtra State Electricity Distribution Company (Mahavitaran). The other bidders included Kalpataru Power Transmission, Madhucon Projects, Torrent Power and Tata Power.

The distribution franchisee agreement, to be operationalised by January 2008, entrusts Crompton Greaves to carry out all operations that the State utility conducts at present in lieu of a fixed amount to be paid monthly to Mahavitaran. Franchisees are now expected to be invited for Aurangabad, Ulhasnagar, Kalwa, Jalgaon, Malegaon and Dhule, according to officials.

Electrical equipment maker Indo Asian Fusegear Ltd has secured two contracts aggregating Rs 50 crore from the electricity board of Madhya Pradesh for distributing power in Jabalpur town for a period of three years.

The company is betting on bringing down aggregate T&D losses to around 30 per cent by the end of the third year, from levels of around 60 per cent currently.

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