Evaluating public-private partnerships in India


Conference: Metering, Billing/CRM India
Location: New Delhi, India
Presenter: Ashish Kanna
Abstract: Presented by Ashish Kanna at Metering, Billing/CRM India

While Indian GDP growth has been impressive, inadequate electricity services and power infrastructure compromise India’s poverty alleviation efforts, its economic competitiveness, and private investment in energy-dependent industry.  The key challenges in the power sector remain as low levels of access, inefficiently governed distribution sector, and insufficient generation:

India requires investments of approximately USD 150 billion in power sector during the eleventh plan, as per recent estimates of Planning Commission. Since public investments are not sufficient to provide adequate funding for the sector, and more importantly under existing institutional constraints in undertaking project management of such magnitude of capital expenditure (almost 3 times of current levels), Public Private Partnership (PPP) is increasingly being accepted as the most viable option of meeting power sector deficits.

The PPP process has evolved in each segment of power sector value chain over last decade. The PPP process in generation sector in India has moved from negotiated PPAs, to regulator approved Cost plus Power Purchase Agreements to now Tariff based Competitive Bidding process (as mandated under National Tariff Policy and now undertaken in recent ultra mega projects).  The transmission business has also witnessed success with Tala (a JV project for evacuation of power from Bhutan to India) and now WRSS projects which have been successfully bid through Independent Private Transmission Company (IPTC) route.

Distribution business has been tougher, where results on PPP have been mixed. The PPP options range from outright privatization of distribution business (in case of Orissa and Delhi), use of franchising (urban franchising in Maharashtra and rural franchising with different models across different Indian states) to outsourcing of different elements of business (practiced in most Indian states). The outsourcing initiatives range from outsourcing Metering Billing Collection (MBC) activities, energy audits, customer service centres, etc.

In terms of way forward for PPP opportunities, for Generation and Transmission projects, PPP options at state level still needs to be tested for private sector interest and viability. In distribution, each state would need to chart its way forward for PPP based on socio- economic context and levels of current institutional capacity. Some of specific constraints that impede development of PPP in power sector include in adequate contract management and bid process management skills, regulatory risks specifically legal and payment security mechanisms and financial losses in distribution sector.