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Discoms need to function independently

THE STATE Government may claim that its decision to divest the UPPCL of transmission business and create a new transmission unit will be a big push to the ongoing power reforms, but allowing the UPPCL to exist as a sole purchaser and distributor of electricity is being seen as a anti-reform step.

india Updated: May 04, 2006 01:17 IST

THE STATE Government may claim that its decision to divest the UPPCL of transmission business and create a new transmission unit will be a big push to the ongoing power reforms, but allowing the UPPCL to exist as a sole purchaser and distributor of electricity is being seen as a anti-reform step.

“They do not want to give up their control of the power distribution companies, and that is the reason why they have allowed the UPPCL to function as a power purchaser and distributor,” pointed out a senior power official. He said, “The UPPCL should disassociate itself from power purchase and distribution business which should go to the discoms.”

The State Cabinet on Tuesday separated the power transmission function from the UPPCL and decided to set a separate transmission corporation. It said that the UPPCL would now trade in purchasing and selling bulk power as it is doing at present. It means that the discoms would continue to be accountable to the UPPCL which would allocate power to the discoms at its discretion.

In fact, there is nothing great about the Government divesting the UPPCL of transmission business. It had to do so because of a statutory provision. The Electricity Act 2003 says that a company that is engaged in transmission business cannot engage in trading (purchase and sale) of power. It was on this count that the UP State Electricity Regulatory Commission (UPERC) treated the UPPCL purely as transmission company and refused approving power purchase agreements entered into by it. It also advised the UPPCL to allocate all the PPAs signed by it after June 9, 2005 to the distribution companies concerned.

Though the UPPCL has been deprived of the transmission work, it will continue to control the four distribution companies-Lucknow, Varanasi, Agra and Meerut against the spirit of the Electricity Act and the stated objective of the power reforms.

Experts say that job to purchase power from the generators and then distribute the same to the consumers belonged to the discoms which should be allowed to function as independent units,” said a senior engineer. He said there was no harm if the UPPCL remained purely a trader, something which the Act also allowed. But the problem is that it does not allow discoms to act independently.

UPERC chairman, Vijoy Kumar said the panel would examine if the Cabinet decision to allow the UPPCL to exist as power a trader was in the spirit of the Electricity Act. He said the panel would have to see as to who would bear the expenditures to run the UPPCL and also the losses it might suffer in power trading. “The Commission will not allow the losses to be passed on to the consumers in the form tariff hike,” he clarified.

First Published: May 04, 2006 01:17 IST