“PDD Privatized”

The Power Development Department of the Jammu and Kashmir state functions like any other state electricity boards of the country and the world.
“PDD Privatized”
Representational Pic

The Power Development Department of the Jammu and Kashmir state functions like any other state electricity boards of the country and the world. Unlike the other state electricity boards of the country that fetches revenue for their respective governments, the JKPDD is the only one of the kind that acts as a sink for the exchequer of the state.

The JKPDD, as a matter of fact, does not accumulate the revenue proportionate to the quantum of the electricity that is generated, procured from other states and distributed by the department to the general public but rather there is an appreciable variation in the mismatch. Although the department is doing exceptionally well and the revenue assortment is gradually increasing annually but till date the government has not yet been cushioned by earning any profit through the department.

One should not be opinioned and start doubting the efficiencies of the engineers and the employees of the department but the reasons for the JKPDD being a profitless organization is other than technical and managerial but infact the sphere includes the political, the social, and the geographical factors to a very large extent. There is no dysfunctioning on account of the department but other factors contribute to the cause.

Recently the unbundling the JKPDD, has been quoted by a few as one of the remedies for the department being running in loss but the same cannot be validated and it's not factual in my opinion. My point of view states that by unbundling the department the government is going to add to our miseries more if not less.

The Power Development Corporation presently the SPDC which was earlier a part of the G & T (Generation & Transmission) wing of the Power Development Department was way back in the 1990s segregated from the PDD and thus the unbundling started right from that instant, by the Generation Wing turning into a Corporation.

However given the vast Power Generation resources of the state of Jammu and Kashmir and in order to bring competition and attract investors and private companies, the move could have been assumed to be an encouraging one but the fact of the matter is that still till date the purpose of un-bundling and creating a PDC has been defeated in its purpose.

There is still monopoly existing in the corporation, the corporation has not been able to invite private operators and the investors are mere the same as usual. Infact as against this, the operators like NHPS etc has started filling their bellies and leaving the PDC and the state government in lurch and in a state of high and dry.

Many of the technocrats and other people might not be in agreement with me but apparently this is the case that appears superficially and within as well. The power houses that were generating earlier in the 1980s are the same with no addition of their capacities after the creating of the generating company except for the Baghliyar Power House whose benefits are again not fully being reaped by the state. The GENCO (Generating company) created by the defragmentation of PDD and formation of the PDC is none other than the PDC.

No private GENCO is operating in the state and no gains have been attained either in terms of the generation enhancement or in terms of the relief to the power starved nation. A few IPPs (independent power producers) have popped up meanwhile but their generations are not more than a few MWs. Rather the paucity of the funds in the PDC has been a big problem.

The people working in the PDC are the same as those working in PDD and as a result no competition, no new efficient generation technologies with shorter construction period and smaller unit sizes have been attracted (which are the motivations of the deregulation of the power industry) and the restructuring of the power industry has failed.

This being not enough, the state government is contemplating plans to de-regularize the transmission, the distribution and other wings of the PDD. The government is just comparing the power sector of the state with the Power industry of other neighboring states and the countries and considering that this power deregulation is being operating successfully over there, the government is presuming that its copy-paste pattern in the state of Jammu and Kashmir can prove to be a solution to the crisis (both financially and in public interests as well) of the Power sector. While it is to be noted that electricity is not like any other commodity which by mere privatization can transform into a profit making company.

A Similar practice earlier sought by the transport department for similar reasons failed miserably and the lives of those people associated with that department have been ruined. Till date we see the trauma and the crises that are going with those families and their agonies have not yet died out. One fails to understand the logic and the reasons for taking such risky moves without prior forecasting the reach of the projectile.

The history of electricity deregulation started back in 1970s when America and Chile deregulated the power industry and subsequently other countries like the Scandinavian (Sweden, Norway, Denmark & Finland) and then the United kingdom switched to the deregulation for the motivations for this switchover were numerous ranging from the reducing the prices, fostering innovations in the otherwise monotonous electricity services, improving services, to the increased efficiency and reliability.

The deregulated structure yields two added job functions for the newly created entities in addition to the already core tasks entrusted to the electricity boards, i.e. functioning as a Power Exchange and as an independent system operator (called the ISO). In the deregulated Power Development Department, the power exchange is absent and the ISO jobs are entrusted to the State Load Dispatch Center (SLDC).

However their role is limited to the maintaining of the security of the network system. In the deregulated models, the governments runs a Power market where the various Generating companies (GENCO), the Transmission companies (TRANSCO), the Aggregators, the Retailors, marketers and other similar entities enter this exchange. Each of the GENCO bids for their generation while the DISCOMs and Retailors etc submit their power requirements and the price they are willing to pay. Finally the supply and demand functions result in an equilibrium state at which the spot price is fixed and all the generators (GENCOs) are paid for their generation at this spot price irrespective of what their bids had been.

The Spot price which is the marginal cost of the last GENCO that meets the demand results in small profits to that GENCO but a healthy profit for all others whose bids were less than the spot price. In addition to the spot pricing, which is run after every predetermined time interval, the latest innovation in the power market is the payments for the capacity reserves, i.e. the payments for GENCOs who don't actually generate the energy but who remain standby and their services are used for meeting the contingency conditions like that of the tripping of some units or sudden increased power requirements etc.

All these functions of the power markets make it a very competitive and efficient sector like a stock broking exchange. However to imagine this being existing in the state of Jammu and Kashmir is a very rare thing and one wonders if such a system can exist over here, given the conditions of the state.

The transmission wing (TRANSCO) usually remains regulated and controlled by the government and the revenue of this wing is generated by charging the GENCOS and the DISCOMS for using the services for bulk transportation of Power over long distances using the transmission network of the TRANSCO.

The transmission network is the most crucial system of the electricity departments of any country and since its security is of prime concern and cannot be compromised on, hence this system is usually regulated by the government to provide non-discriminatory connections and comparable service for cost recovery, which earns revenue from this sector. In many a countries, the transmission rights are also sold in a transmission right auction which is a market where market participants submit their bids for the purchase of the transmission rights.

The distributors (DISCOM) have the jobs entrusted of maintaining the distribution network and the system and again having a competition among DISCOMS level can be beneficial for the consumer. The next important section of the unbundled system is the RETAILCO or the TRADECO and again having healthy and sufficient private RETAILCOs can be in the interests of the general public.

The RETAILCOs sells the electricity it buys and attract the customers by combining electricity products and services in various packages for sale. In many countries, an aggregator, which is an entity or a firm, combines customers into a buying group and this group buys large blocks of power and services at cheap prices. An aggregator sometimes acts as a broker between the customers and the retailers. Other entities that are associated with this electricity industry are the marketers, brokers, etc whose roles keep on varying.

The market control i.e monopoly that is existent in a single electricity provider or the utility held by the local government is mitigated by introducing competition and regulation. The Power Development Department, whom we curse every now and then for the increase in the tariff charges, in actual have a high marginal cost of the electricity but because of the regulation, the consumers pay just a meager part of it.

Having said so and the earlier stuff of the deregulated power industry working, one wonders to what extent the deregulation of the Power Sector of the State would be successful in achieving the goals. Broadly speaking, taking the factors into account that there is virtually no potential for the private operators to invest in the Generation or the retail sections of the electricity because of the high risk.

No private company will operate on loss and with the modus operandi the PDD has, no private company can adopt the same. The government might be successful in defragmenting the department but it sure won't achieve the unbundling results. The miseries of the general public are going to double be it the inflated bills or the quantum of electricity supplied as per the payments received. But before switching to this new version of the electricity department, we, as public of the state, have to change and accept that like the telephone bills we pay as per the usage, the same is to be with the electricity. The big question is are we ready for that?

Presently the Power Development Department's Transmission Network is entrusted to the System and Operation Wings each for Jammu and Kashmir while the TRADECO and DISCOM jobs are carried out by the Electricity Maintenance and Rural Electrification Wings of each Province.

Other jobs are carried out by other wings viz, the Commercial & Survey wing, The Procurement and the Design wing, The Purchase and Material Management wings of the utility, while the Generation wing has already been segregated and transformed into a corporation. As such the paucity of the staff and the physical constraints has resulted into the electricity utility with overloaded activities.

The only solution that appears to me in the near sight is the maintaining the status quo of the department with a simple modification of adding a new wing who can effectively manage the billing and the commercial parts of dealing with the consumers and matters regarding to their grievances. In other words a TRADECO is the need of the hour in PDD, so that the EM&RE wing can perform the jobs of DISCOM in an effective manner and to the satisfaction of themselves and the general public at large. That's the only solution for our power woes that appears in the near sight.

(Shoaib Shah is Masters of Power Engineering student @ University of Sydney, Australia)

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