Gujarat government may merge 4 power distribution companies

Monday, 22 April 2013 12:50 Lathish PV

GujaratEight years after the Gujarat Electricity Board (GEB) was un-bundled into separate holding, generation, transmission and distribution companies, the state government is now thinking of merging the four power distribution companies into one entity. In 2005, the GEB was un-bundled into separate entities under the Electricity Act of 2003, as part of the restructuring of the electricity sector to improve efficiency in management and delivery of services to consumers.

The exercise led to the creation of Gujarat Urja Vikas Nigam Limited (GUVNL), which is the holding company; Gujarat State Electricity Corporation Limited (GSECL) for generation business; and Gujarat Energy Transmission Corporation Limited (GETCO) for electricity transmission.

Dakshin Gujarat Vij Company Limited (DGVCL), Madhya Gujarat Vij Company Limited (MGVCL), Uttar Gujarat Vij Company Limited (UGVCL), and Paschim Gujarat Vij Company Limited (PGVCL) were formed for distributing power in the south, central, north and Saurashtra regions of the state, respectively.

However, just eight years down the line, the government is now contemplating merging back the four distribution companies.

"The proposal to merge the discoms is under consideration. No decision has been taken yet," DJ Pandian, principal secretary, energy & petrochemicals department, told dna.

A source said that the entity proposed to be formed by merging the four distribution companies is likely to be named Gujarat Vij Vitran Nigam Limited (GVVNL).

A senior official of one of the distribution companies said that individual discoms are facing issues such as load management and maintaining uniform tariff. The discoms do not have enough negotiating power and face problems in fulfilling financial obligations. There is a feeling that all this can be avoided by forming a single company.

"There are also operational issues in implementation of availability-based tariff (ABT), which has financial implications when one discom is under-drawing power and another is over-drawing. In the case of a single discom, demand can be met in an optimal manner," the official said.

Tax implication is another key reason behind the proposal.

"There will be huge tax liabilities as transactions between GUVNL and discoms can now be covered under the ambit of specified domestic transaction under Transfer Pricing Regulation scenario. Part of this can be avoided in the case of a single company," said an official.

The GUVNL has proposed keeping intact the existing organizational structure after re-bundling of the discoms.

"The entity formed by re-bundling the discoms can be headed by an MD. The discoms can work under a single board as zonal offices. The heads of zonal offices will be MDs or CEOs of the respective existing discom," explained a senior GUVNL official.

There was strong opposition from GEB employees when the proposal to un-bundle the board was mooted by the government back then. However, employees are believed to be in favour of the latest move.

A senior official said that un-bundling of GEB was primarily aimed at reducing its mounting losses, curbing rampant power theft and providing functional autonomy. It was also felt that the move would help in inculcating greater competitiveness among the companies, he said.

The purpose has more or less been achieved as the four distribution companies are among the best in the country. The Gujarat discoms were the only ones in the country to have received the top rating of A+ in an exercise commissioned by the power ministry.

An industry observer said that the purpose of carving out separate discoms had been partly achieved, but operating efficiency has come down due to increased employee burden at the corporate level.

"Previously, a few people were managing affairs at the state-level. Now, four different companies, each of them having their own administrative staff, are doing it," he said.

Source- DNA