NTPC, PGCIL sign MoU to enter Power Distribution Business
The Indian Public Sector Undertaking’s (PSUs) National Thermal Power Corporation Limited (NTPC Ltd) and Power Grid Corporation of India Limited (PGCIL) have signed an agreement to set up National Electricity Distribution Company Limited (NEDCL).
The forming of a joint venture to set up National Electricity Distribution Company by NTPC, a leading power generator, and Power Grid, which owns India’s largest power transmission network, paves way for two to get into consumer electricity supply business. As per the agreement NEDCL will be a joint venture of NTPC and PGCIL on 50:50 equity basis.
Objective: To undertake business for distribution of electricity in distribution circles in various states and Union Territories (UTs) and other related activities.
Significance: As the announcement about Joint venture comes at a time when existing reform scheme UDAY (Ujwal DISCOM Assurance Yojana) has been declared as a failure by several agencies, thus this move could also hint at another round of power distribution reforms.
Reform Includes: Separation of content and carriage businesses in power distribution which means that the infrastructure builder for power supply and supplier to consumers would be two separate companies. This would make power distribution sector more competitive as separating content and carriage will bring more competition with more than one power supplier.
These measures have been suggested in latest amendments to Electricity Act, 2003, which is yet to be tabled in Parliament.
Ujwal DISCOM Assurance Yojana was launched by government of India in 2015 with aim of turning around the state-owned discoms financially and operationally as well as finding a permanent solution to financial mess that power distribution is in. Although the financial part was concluded with states’ taking over losses of distribution companies and issuing bonds but operational front is still facing challenges.
Current Status: At the end of Financial Year 2019, Losses of state-owned discoms grew by more than 40% (Rs.21,658 crore) but at the same time, the dues of discoms to power Generation company (gencos) stood at Rs.38,023 crore.