NTPC is firming up plans to enter power distribution, an area the state-run company has mostly stayed away from so far despite producing more than a quarter of India's total electricity output.
It plans to bid for distribution rights in cities that may open up the segment to the private sector. Just a handful of Indian cities at present have private distributors, all in joint ventures with state utilities, a model that NTPC too is considering. "Many states are likely to open up distribution business for private or public participation to bring in efficiency in this sector. NTPC finds opportunity in entering into distribution business through participation in these bids," a senior NTPC official said.
NTPC will venture into distribution through its wholly owned subsidiary, NTPC Electric Supply Co, which currently provides turnkey execution of transmission projects, project monitoring, third-party quality inspection and consultancy.
In fact, the company has some experience in distribution. It has an equally owned joint venture with the Kerala Industrial Infrastructure Development Corporation to supply power at the state agency's industrial parks.To begin with, it plans to appoint experts and engage professionals who would advise the company on bidding processes that are currently on or are in the offing. The aim is to win circles that will be profitable. The distribution sector in the country is dominated by state-owned distribution companies or state electricity boards as distribution licensees.
But several states have now opened up the sector and are already inviting private companies to take up distribution in cities.
"The opportunities could be for input power based, incremental revenue sharing based, light capex model or any other model," the NTPC official said.
The World Bank in a recent report said India's power distribution sector needed sweeping reforms if it is to bring back the country to a high growth trajectory and meet its goal of expanding access to electricity to all by 2019. The study has identified electricity distribution to the end consumer as the weak link in the sector.
The report recommended freeing utilities and regulators from external interference, increasing accountability and enhancing competition in the sector to move it to a higher level of service delivery.
The power sector's total accumulated losses were $25 billion in 2011. These losses are concentrated among distributors and bundled utilities — state electricity boards andstate power departments, the report said.