Standard bidding document for discoms not to reform power sector but to privatize: AIPEF

The All India Power Engineers Federation (AIPEF) on Friday said the draft standard bidding document for discoms circulated by the power ministry is not to reform the sector but to privatise it across the country.

In September, the Ministry of Power came out with a draft Standard Bidding Document (SBD) for privatisation of distribution licensees and sought public comments on it till October 5.

It provides guidelines for states who want to offer their electricity distribution utilities to private players to improve operational efficiency and finances.

"The intention of the Ministry of Power in rushing through SBD is not to reform the power sector but to thrust privatization of the power sector across the country,” AIPEF spokesperson V K Gupta said in a statement.

AIPEF in its submission of comments has written that before considering the SBD proposal, the fundamental issue of privatization of disocms itself is not agreed to since it is the prerogative of the respective state government.

"It appears that the central government has taken the decision regarding privatization of distribution utilities(discoms) across the country,” the statement said.

AIPEF has also included the comments of former power secretary EAS Sarma on SBD in its reply.

Sarma mentioned that power distribution network is of strategic importance and it will be prudent to screen the foreign investors before allowing them to bid directly or through sponsored bidders.

"Rental for the land at a nominal rate in SBD implies an invisible subsidy to the private company. This means an incremental hidden profit to the private player, which needs to be quantified,” AIPEF pointed out.

While the employees are guaranteed the same service benefits as on the date of transfer to the private company, the prospective statutory scenario remains somewhat uncertain in view of the adoption of extensive revisions in the labour laws, it added.

Densely populated urban clusters are the ones that generate revenues for discoms who in turn deploy the same for cross-subsidization of consumer groups in sparsely populated areas where the unit cost exceeds the unit revenue, it said.

By transferring such revenue-rich clusters to private players with 100 per cent equity share, the government will hurt the interests of discoms, it alleged.

Further AT&C (aggregate technical & commercial) losses are not a reliable parameter for bidding, it pointed out.

The bidding format should encourage private players to make optimal investments to reduce technical losses and improve the quality of the power supplied, it suggested.

AIPEF said discoms are already under financial stress and the tariffs still have a gap between the average cost of supply and average revenue.

In this scenario, for profit seekers to operate will not solve the financial crunch but rather deteriorate it, the body added.

In this scenario, for profit seekers to operate will not solve the financial crunch but rather deteriorate it, the body added.

Section 63 of the electricity Act 2003 does not extend to the evaluation of distribution utility or its bidding/determination, it added saying that most discoms do not have or have not maintained a fixed asset register.