Viability of Jharkhand’s Electricity Distribution: Distorted by Legacy and Consumer Profile

Abstract

The state of Jharkhand is rich in mineral reserves, including coal, but lags in development compared to most of India. This paper attempts to examine the structure and legacy of electricity distribution in the state with a lens to examine how that impacts the future viability of the distribution companies (DisComs).

After unbundling of the erstwhile Jharkhand State Electricity Board (JSEB), Jharkhand Bijli Vitran Nigam Ltd (JBVNL) took over virtually all of the distribution segment in 2014. It inherited High AT&C losses, poor electricity access, and a list of legacy issues. While there are five distribution companies (DisComs), their size and performance are very skewed. Four have very low operational and financial losses, but still Jharkhand state’s overall performance parameters (e.g., AT&C losses) are significantly worse than the all-India average.

The analysis shows that two public sector utilities, JBVNL and Damodar Valley Corporation (DVC), serve more than 90% of consumers. The latter is a hub for major industrial activities that have cumulatively and historically had a high energy demand. DVC also happens to be an integrated utility under Central Govt. control, with extensive generation capability, also selling power in parts of West Bengal. This leaves smaller and less remunerative consumers for JBVNL to serve, with DVC keeping large industrial consumers. This leads to DVC having lower AT&C losses and high revenues, and JBVNL lacking a diverse consumer mix with enough consumers capable paying crosssubsidies for offsetting under-paying consumers. The asymmetric consumer profile becomes a key challenge for the viability of the majority provider of electricity (JBVNL) considering the traditional Indian utility equilibrium has relied not just on subsidies (which are extensive in Jharkhand) but also cross-subsidies from so-termed “paying customers”, the commercial and industrial (C&I) consumers, which are overwhelmingly missing from JBVNL. This paper attempts to examine DisCom viability in light of not only consumer profile distortions but also trendlines of energy sales. We find that a model based on gradual improvements (efficiency) is unlikely to be sufficient in the near term and we may require new policies or instruments, and perhaps new modes for social welfare redistribution outside traditional cross-subsidy models in India. With this, either the burden upon the state exchequer will be high or quality of service may suffer.