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UP Government Halts its Decision on Privatisation of Discoms

Uttar Pradesh Government has announced to take back its plan to privatise the five state-owned electricity distribution companies due an employee agitation that casused state-wide blackouts. The privatisation process was to start with PVVNL (Purvanchal Vidyut Vitaran Nigam Limited).

Backdrop of UP Discom Privatisation

With all the efforts of the Central Government to improve the condition of discoms across India going in vain, it had decided to increase private sector participation in power distribution. In line with this a standard bidding document for discoms was issued by the Government of India in mid-September 2020.

Uttar Pradesh Government went full throttle on this privatization policy as its discoms have one of the country’s highest distribution loss percentages. For the financial year 2019-20, average aggregate technical & commercial (AT&C) loss in Uttar Pradesh stood at mind-boggling 30%, when the national average was of 19.19%. Putting this number in perspective the total losses by all the five discoms of Uttar Pradesh was INR 6000 Crore for FY-19.

Uttar Pradesh Government had already started data collection from six zones, namely Gorakhpur, Basti, Prayagraj, Mirzapur, Varanasi and Azamgarh to work out assets and liabilities to speed up the privatization process of PVVNL.

As soon as this news reached ground an indefinite strike was called on 5th October 2020 by the UP Vidyut Karmachari Sanyukt Sangharsh Samiti (A combined union of electricity distribution and generation employees of U.P.). State-wide blackouts were seen including in important cities of Varanasi, Gorakhpur and Prayagraj.

Interim Solution to Cool Down Employee Agitation

To resolve the deadlock a meeting was called by Uttar Pradesh Power Minister, Shrikant Sharma in presence Suresh Khanna (Finance Minister, Uttar Pradesh) and the representatives of the employee union. Ministers on behalf of UP Government agreed to take back the privatisation proposal for now and cancel FIRs against agitating employees.

Agreement also said that the state power distribution companies will try to improve power supply, operational efficiencies and reduce corruption. Monthly review meetings will be held with the state power minister till January 15, to take stock of progress in the distribution companies. Although, the employee union is arguing that they can also improve the condition and processes which private sector is expected to do to reduce losses, but this is unlikely seeing the tune of losses in these distribution companies. Also, sooner or later UP Government will have to take tough decisions to reduce the huge burden on its treasury.