Maharashtra's electrifying annual losses of Rs.5,000 crore

By R.N.Bhaskar

May 10, 2007 (published in the DNA). pdf version available here (2007_05_DNA_Maharashtra's electrifying annual losses of Rs.5000 crore_130kb.pdf )

-------------------------------

Instead of reducing transmission and distribution (T&D) losses to 18% as agreed in an MoU between the Central government and the Maharashtra government, the state’s power distribution company has been able to reduce losses only by 2% each year. Even in 2010, T&D losses are projected to be 30.5%!

The CAG report points out that each percentage of<> T&D losses deprives the state of Rs.230 crore of profit. Thus, at the lower end of T&D losses (32.58%-18% x Rs.230 crore), the state allowed Rs.3353.4 crore to leak out each year. At the higher end, the state lost Rs. 4956.5 crore annually! And as generation capacity increases, the huge percentage losses could translate into annual losses of over 7,000 crore. <>

The worst sufferers, as always, are honest full-tariff-paying industrial and commercial units when load shedding takes place. But more on that in these columns next week.

---------------------------

Maharashtra is reeling under a power crisis. Demand for electricity outstrips supply. True, additional power generation capacities – often at much higher costs – are likely to become available to the state from next year onwards. But with demand also soaring, the state could continue to experience load shedding even next year. The Maharashtra Electricity Regulatory Commission (MERC) believes that loadshedding for upto 32 hours for industry is inevitable. But there could be another solution – by curbing power theft. But that will require political will.

<> The government claims that the crisis is on account of poorly planned additional power generation capacity. But the truth is a lot more sinister. The reason the state has been reeling under a power crisis is because it has actually abetted power theft and has been inept at curbing distribution losses (often a euphemism for clandestine diversion of power). <>

Take the finding (see table) made on 14 March 2007, at an open-house discussion by Prayas (www.prayaspune.org), an NGO engaged in a lot of pioneering work relating to the power sector. It pointed out that instead of reducing transmission and distribution (T&D) losses to 18% as agreed in an MoU between the Central government and the Maharashtra government, the state’s power distribution company has been able to reduce losses only by 2% each year. Even in 2010, T&D losses are projected to be 30.5%!

Table 1: Distribution Loss
Year	2006	2007	*2008*	*2009*	*2010*
Transmission Loss (%)	4.5%	4.9%	4.9%	4.9%	4.9%
Distribution Loss (%)	35.0%	33.0%	31.0%	29.0%	27.0%
Total T&D Loss (%)	37.9%	36.2%	34.3%	32.4%	30.5%
Source: Prayas Presentation on MSEDCL MYT FY 2008-10

<>This has also been highlighted by the recent report of the Comptroller & Auditor General (CAG) which found that T&D losses ranged between 32.58% and 39.55% annually between March 2001 and March 2006. The CAG report also points out that each percentage of T&D losses deprived the state of Rs.230 crore of profit. Thus, at the lower end of T&D losses (32.58%-18% x Rs.230 crore), the state allowed Rs.3353.4 crore to leak out each year. At the higher end, the state lost Rs. 4956.5 crore annually! And as generation capacity increases, the huge percentage losses could translate into annual losses of over 7,000 crore. <>

This theft takes place in three ways. <>

First, it is by stealing power from any unmetered line – street lamp cables or transmission lines. This remains the largest contributor to T&D losses. <>

Second, it is by deftly allowing industrial or commercial units to consume power using residential power connections. Thus, commercial units invite much lower residential tariffs. <>

Third, it could be by allowing industrial or commercial units to get power through agricultural power connections. Since power for agricultural purposes invites the lowest tariffs, many industrial and commercial units use this type of power in connivance with the authorities. <>

Frighteningly, ‘theft’ of power through the last two methods do not even get reflected as losses on the books of power distribution companies. What happen is that consumption of electricity by the domestic sector would show up to be larger than it actually is. Likewise, the consumption of agricultural power would also get inflated. If one adds these ‘misdeclarations’ to the losses, they could easily add another Rs.2,000 crore annually. <>

The worst sufferers, as always, are honest full-tariff-paying industrial and commercial units when load shedding takes place. But more on that in these columns next week.

Maharashtra's electrifying annual losses of Rs.5,000 crore

Table 1: Distribution Loss

Source: Prayas Presentation on MSEDCL MYT FY 2008-10