Privatization of Electricity Distribution and Retail Supply in Dadra & Nagar Haveli and Daman & Diu

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Privatization of Electricity Distribution and Retail Supply in Dadra & Nagar Haveli and Daman & Diu

  • The Union Cabinet has approved the formation of Company (Special Purpose Vehicle) to privatize the electricity distribution business in the Union Territory of Dadra & Nagar Haveli and Daman & Diu (DNH&DD)
  • The said privatisation process will fulfill the desired outcomes of better services to over 1.45 lakh consumers of DNH&DD, operational improvements and functional efficiencies in distribution and provide a model for emulation by other utilities across the country.
  • In May 2020, Government of India had announced ‘AtmaNirbhar Bharat Abhiyan’, to make India self-reliant through structural reforms.
  • One of the key measures planned was to reform the power distribution and retail supply in UTs through privatization of the power distribution utilities, for leveraging private sector efficiency in electricity distribution.
  • A single distribution company i.e. DNH-DD Power Distribution Corporation Limited would be incorporated as a wholly owned Government Company and Trust(s) shall be formed to manage the terminal benefits of the personnel transferred to the newly formed company.
  • Transfer of assets, liabilities, personnel etc to the newly formed company will be done as per the Dadra and Nagar Haveli and Daman and Diu Electricity (Reorganization and Reforms) Transfer Scheme, 2020

Systemic Issues Faced by Power Sector in India

  1. Power Generation Issues
  • Fossil fuel derived energy generation: Thermal power based on fossil fuel such as coal, natural gas and diesel accounts for 80% of the country's generation.
  • Moreover, the majority of plants in India are old and inefficient.
  1. Higher Cost of Fuel: Coal extraction from state-run Coal India (a near-monopoly), has stagnated due to delayed environmental clearances, land acquisition troubles and little investment in advanced technologies.
  • Many power companies have to look for coal mines overseas and source more expensive imports (despite having abundant coal reserves).
  1. Transmission and Distribution Issues
  • Tariffs haven't risen enough for years to cover costs for subsidies in the agriculture sector. Also, high aggregate technical and commercial (AT&C) losses, has forced electricity distributors (discoms) into losses as high as 40% in some states, while the country-wide average is 27%.
  • Discoms are not able to pay the power generators regularly simply because they have a cash flow problem, which stems from the low tariffs awarded by the regulatory commissions.