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1st February 2024 (10 Topics)

Discom Privatisation and the Need for Competition


The road to discom privatisation in India faces various challenges, including resistance from stakeholders, political interference, and debates over tariff structures.

  1. Importance of Distribution and Sector Performance:

      - Distribution's Vital Role: As the end link in the electricity value chain, power distribution companies (discoms) are crucial for cost recovery, funding capital expenditure, and maintaining consumer tariffs.

     - Government Measures: Despite challenges, government initiatives like the Revamped Distribution Sector Scheme (RDSS) have improved efficiency, billing and collection, customer service, and reduced AT&C losses for state-owned discoms.

     - Innovation: Inspite of the challenges in India's discom privatisation journey, a focused approach on inducing competition through innovative models and amendments to past approaches is seen as crucial for long-term success.

  1. Privatisation Models and Their Efficacy:

     - Role of Privatisation: Privatisation is seen as a means to induce competition, aligning with the Electricity Act 2003's objectives; however, it is not a guaranteed solution.

     - Historical Examples: Past experiences with models like the Distribution Franchising (DF) highlight the need for a robust regulatory framework, transparent contractual agreements, and a phased approach for sustainable privatisation.

     - Room for Growth: Private discoms cover only around 10% of the population, indicating potential for expansion and a need for diverse models.

  1. Regulatory-Based Franchise Model for Sustainable Privatisation:

      - Potential Model: Regulatory-based franchise emerges as a potential solution, contingent on a robust regulatory framework ensuring transparency, fair competition, and protecting consumer and franchisee interests.

     - Performance Standards: The model involves regulatory bodies setting performance standards, tariff structures, and monitoring compliance to create a level playing field for stakeholders.

     - Efficiency and Consumer Satisfaction: With a well-defined regulatory framework, transparent agreements, and a focus on performance standards, this model can significantly enhance efficiency, infrastructure, and consumer satisfaction.

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