No. A-118/2003 –IPC(Vol.IV)

Government of India Ministry of Power 

Shram Shakti Bhawan, Rafi Marg, New Delhi, dated 3rd December, 2009 

To 

The Principal Secretary / Secretary (Energy) of all States / UTs.

Sub:-       Distribution reforms under the modified Mega Power Policy. Sir, 

Policy guidelines for setting up of mega power projects were last revised and issued vide this Ministry’s letter of even number dated 2nd August, 2006. In order to further liberalize the mega power policy and also remove such provisions which have lost relevance since the Mega policy was initially formulated the Government has made the several modifications in the Mega Power Policy and the revised policy guideline is being issued separately. One of the decisions taken in this regard is that the existing condition of privatization of distribution by power purchasing states would be replaced by the condition that power purchasing states shall undertake to carry out distribution reforms as laid down by Ministry of Power(MoP).

 Accordingly, the matter was examined in the Ministry of Power and was followed up in the meeting held on 28th October, 2009 with the representatives of State Power Departments in which various measures for distribution reforms that could be taken up by the State Government were discussed in detail. Summary record of discussions of the aforesaid meeting is annexed (Annexure-I) 

In the aforesaid meeting, it was observed that distribution reforms like establishment of franchisees in rural areas and reduction of AT&C at utility level are already included in the RGGVY and APDRP schemes of the MOP and for which States give undertakings so it need not be included under the reforms under the Mega Power Policy. There was a broad consensus at the aforesaid meeting that certain key reform measures needs to be undertaken by power purchasing States namely, timely release of subsidy, ensuring timely approval of annual revenue requirement/tariff determination according to the SERC regulations, setting up special  courts to tackle theft of electricity and ring fencing of State Load Dispatch Centres (SLDCs). 

Accordingly, in pursuance of the Cabinet decision dated 1st October, 2009 on the modification to the Mega Power Policy, following four distribution reform measures hereby laid down by the Ministry of Power  required  to be undertaken by the States purchasing power from the mega power projects: 

a)        Timely release of subsidy as per Section 65 of Electricity Act 2003.

b)       Ensure that Discoms approach SERC for approval of annual revenue requirement/tariff determination in time according to the SERC regulations.

c)        Setting  up  special courts  as provided in the Electricity Act 2003 to tackle theft related cases.

d)       Ring fencing of SLDCs. 

An undertaking in the enclosed format (Annexure-II) may be given to the Ministry of Power. The said undertaking needs to be given at least once and would be considered in all the cases where the concerned State Distribution Utility ties up procurement of power from a power project considered for grant of mega power status. 

Receipt of this communication may please be acknowledged and the undertaking in the enclosed format may be sent to this Ministry at the earliest to facilitate processing of the Mega Power Policy case(s). 

Enclosed: As above.

Yours faithfully 

(Puneet K Goel) Director (IPC) 

Copy to : i) Chairman, CEA., ii) CMDs of all PSUs of MOP Copy for information to:-

PS to MOP / PS to MOS (P) / PS to Secretary(P) / Sr. PPS to AS(AK) / PPS to AS(GBP)

/ All Joint Secretaries in Ministry of Power. Copy  also to Cabinet Secretariat, New Delhi.

NIC (MOP) for putting on website of Ministry of Power. 

(Puneet K Goel) Director (IPC) 

Ministry of Power

Annexure-I 

Summaryrecord of discussions of  meeting held under  Chairmanship of  Shri I. C.

P. Keshari, Joint Secretary(IPC), Ministry of  Power  on  28th      October,  2009 at

10.30 AM with representatives of State Power Departments on  distribution reforms in pursuance of the decision of the Cabinet on modification to the mega power policy. 

List of participants is annexed. 

JS(IPC) welcomed all the participants. He referred to the recent decision of the Cabinet on modifications to mega power policy and informed that this meeting has been called to seek the views of the State Governments on the distribution reforms which has now been made part of the mega power policy conditionalities. He informed that, Cabinet while approving the modification proposals to the mega power policy, have replaced this by the condition that power purchasing states shall undertake to carry out distribution reforms as laid down by the Ministry of Power. Therefore, Ministry of Power is now required to stipulate those specific measure of distribution reforms which the States purchasing power from the mega project are required to undertake while grant of mega power certificate. 

He further informed that the  Ministry of Power  hopes  to arrive at a consensus on the specific distribution reform measures which the State Government would undertake to carry out.  Such undertaking would be required at least  once, in respect of the first of the mega power projects that would come up for implementation and the same undertaking would be applicable for the subsequent mega projects. 

Director(Thermal), MOP made a brief presentation on existing mega power policy highlights, changes approved by the Cabinet and suggested distribution reform measures. Thereafter following distribution reform measures were taken up for discussion one by one with the representatives of the State Government present:

Metering of all consumers including agriculture  &  single point consumers  and adoption of energy accounting & auditing.

Establishment of franchisees in rural areas. Reduction of AT&C at utility level:

#    Utilities having AT&C loss above 30%: Reduction by 3% per year

#  Utilities having AT&C loss below 30%: Reduction by 1.5% per year Timely release of subsidy as per Section 65 of Electricity Act 2003.

Ensure that Discoms approach SERC for approval of annual revenue requirement/tariff determination in time according to SERC regulations

Finalization of Audited Annual Accounts of previous year by 31st March Open Access in Distribution, Ring fencing of SLDCs

Set up special courts as provided in the Electricity Act, 2003 to tackle theft of electricity as per sections 153-157 of Electricity Act 

Director(R&R), MOP added that rationale behind these distribution reform measures are strengthening repayment capacity of Discoms by increasing revenue collection, cutting down  commercial  losses thereby promoting financial health of Discoms.

The representative of the State Government of Gujarat referred to various distribution reform measures and stated that it was tough to bring down AT &C losses below 20%. Representative of West Bengal stated that it should be open to the State Government to  distribute electricity in rural areas through any  suitable medium not necessarily through franchisees. 

Representatives from the Harayana, Tamil Nadu and Karnataka sought clarifications on various aspect of mega power policy as in vogue and changes now brought out. These related to prospective applicability of the instant amendments, applicability of ICB procedure, inter-State sale of power, procurement of power through negotiate route, mention of mega power benefit admissibility in the RFP documents. These were appropriately addressed in light of extant policies and guidelines. 

JS(IPC) stated that all the States have set up SERC/JERC except Arunachal Pradesh Arunachal Pradesh has been advised to set up independent regulatory Commission or join any other  joint regulatory commission.  He further mentioned  that in the interest of financial health of Discoms, the States should release the subsidy to them regularly. He also pointed out that distribution reforms like establishment of franchisees in rural areas and reduction of AT&C at utility level are already included in the RGGVY and APDRP schemes of the MOP and for which States give undertakings so it need not be included under the reforms mooted under the Mega Power Policy. It was agreed that following key reform  measures be undertaken by power purchasing State(s) 

a)      Timely release of subsidy as per Section 65 of Electricity Act 2003.

b)       Ensure that Discoms approach SERC for approval of annual revenue requirement/tariff determination in time according to the SERC regulations.

c)       Setting up special courts as provided in the Electricity Act 2003 to tackle theft of Electricity.

d)        Ring fencing of SLDCs. 

Representatives of the State Governments were requested to act swiftly on the above. 

The meeting ended with vote of thanks to the Chair.

List of Participants

Annexure 

1.                  MINISTRY OF POWER 

Shri I.C. P. Keshari, Joint Secretary                        in Chair Shri Puneet K. Goel, Director

Shri Malay Srivastava, Director  Shri S. Narayanan, Under Secretary Shri K. C. Sharma, Under Secretary Shri C. J. Jose, Under Secretary Shri A. Sengupta, Section Officer. 

2.                  Govt. of Madhya Pradesh 

Shri A. Shrivastava , Addl. CE(DRG), MPPGCL 

3.                  Govt. of Punjab. 

Shri K. D. Chaudhry, Member, PSEB 

4.                  Govt. of Himachal Pradesh 

Shri Ravinder Thakur, Protocol Officer. 

5.                  Govt. of Karnataka 

Shri T. Sannappa, Resident Engineer 

6.                  Govt. of Sikkim 

Shri P. B. Subba, C.E. 

7.                  Govt. of Tamil Nadu

 Shri V. K. Jain, R.M. 

8.                  Govt. of Uttar Pradesh 

Shri Srikant Prasad, Director. Shri Navdeep Rinwa, M. D.. 

9.                  Govt. of Chattisgarh. 

Shri L.S. Chawla, C.E.(Comml.) Shri S. P. Chaturvedi, M.D.(Gen.) 

10.              Govt. of Kerala 

Shri Muhanmmed Jaffaar, OSD 

11.                Govt. of Gujarat 

Shri L. Chuaungo, M. D., GUVNL 

12.              Govt. of West Bengal 

Shri Debashis Sen, M. D., West Bengal Power Development Corp. 

13.                  Govt. of Rajashthan 

Shri A.K.Sharma, SE(TD), RVUN  Shri B.K.Makhija, Ad. Projects, RVPN 

14.              Govt. of Haryana 

Shri D.C.Arya, FA/HQ, HPGVL

Shri R.C.Chaudhary, CE(Operation), UHBNL Shri A. K. Jain, C.E.. DHBVN 

15.              Govt. of Tamil Nadu 

Shri R.Ganapathy Sankaran, TNEB 

16.              Govt. of Andhra Pradesh 

Shri N.V.V.S.Chandra Sekhar, DE(IPC), APTransco Shri Neel Kanth, ALO, A.P.Bhavan 

17.              Govt. of Arunachal Pradesh 

Dr. Hari Krishna, Principal Secretary (Energy) 

18.              Govt. of Nagaland 

Shri T.S.Angami, Addl. Chief Engineer 

19.              Govt. of Jharkhand 

Shri S.N.Choudhary, Memebr(Distn.), JSEB Shri Anjani Kumar, Resident Executive, JSEB 

20                Govt. of Bihar 

Shri S.N.Sinha, Resident Executive, BSEB 

21                Govt. of Delhi 

Shri B.C.Mathur, GM(SLDC), DTL 

22.       NTPC 

Shri I. K. Kapoor, Dir.(Comml.). Shri V. K. Padha, GM(Comm.) 

23        NHPC Ltd. 

Shri B.R.Saraf, ED(Projects) Shri Arvind Bhat, CE(Design)

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PROFORMA

No.

State Government Power/Energy Department

ANNEXURE-II