April 22, 2013

Eight years after the Gujarat Electricity Board (GEB) was unbundled into separate holding, generation, transmission and distribution companies, the state government is now thinking of merging the four power distribution companies into one entity.

The exercise led to the creation of Gujarat Urja Vikas Nigam Limited (GUVNL), which is the holding company; Gujarat State Electricity Corporation Limited (GSECL) for generation business; and Gujarat Energy Transmission Corporation Limited (GETCO) for electricity transmission.

Dakshin Gujarat Vij Company Limited (DGVCL), Madhya Gujarat Vij Company Limited (MGVCL), Uttar Gujarat Vij Company Limited (UGVCL), and Paschim Gujarat Vij Company Limited (PGVCL) were formed for distributing power in the south, central, north and Saurashtra regions of the state, respectively.

According to officials, the proposal to merge the discoms is under consideration. No decision has been taken yet.

Individual discoms are facing issues such as load management and maintaining uniform tariff. The discoms do not have enough negotiating power and face problems in fulfilling financial obligations. There is a feeling that all this can be avoided by forming a single company.

There are also operational issues in implementation of availability-based tariff (ABT), which has financial implications when one discom is under-drawing power and another is over-drawing. In the case of a single discom, demand can be met in an optimal manner.

Tax implication is another key reason behind the proposal. There will be huge tax liabilities as transactions between GUVNL and discoms can now be covered under the ambit of specified domestic transaction under Transfer Pricing Regulation scenario. Part of this can be avoided in the case of a single company.

The GUVNL has proposed keeping intact the existing organizational structure after re-bundling of the discoms.

Unbundling of GEB was primarily aimed at reducing its mounting losses, curbing rampant power theft and providing functional autonomy. The purpose has more or less been achieved as the four distribution companies are among the best in the country. The Gujarat discoms were the only ones in the country to have received the top rating of A+ in an exercise commissioned by the power ministry.

Source: Media Reports