‘Privatisation only way to mitigate Purvanchal, Dakshinanchal losses'

Time of India

19-07-2025

Amid growing protest over privatisation of power distribution companies in the state, Uttar Pradesh Power Corporation Limited chairman Ashish Kumar Goel has claimed that the corporation has decided to privatise Purvanchal and Dakshinanchal to overcome the dual challenge of mounting financial losses and operational inefficiencies in its power distribution network.
This will help the corporation to bridge the staggering cash gap and pave the way for a sustainable energy future in UP, he said.
In an exclusive interview with Arvind Chauhan, the UPPCL chairman said that privatisation is the only solution to mitigate the losses of Purvanchal and Dakshinanchal discoms and will benefit both consumers and the state.
The Case for Privatisation
The decision to privatise Purvanchal and Dakshinanchal has been taken after considering their dismal performance across technical, commercial, and financial metrics, said Goel.
"These are the worst-performing discoms, leading to frequent transformers damage, tripping, poor billing quality, and low collection efficiency. Unlike better-performing regions like Noida or Lucknow, these discoms have consistently lagged and impacted UPPCL's overall financial health," Goel added.
The numbers paint a grim picture. In 2024-25, UPPCL's cash gap—the difference between expenses and revenue—soared to Rs 48,515 crore, up from Rs 39,254 crore in 2023-24.
Purvanchal and Dakshinanchal contributed the lion's share to this deficit. Over the past five years, expenses have grown at 8.3%, while revenue has lagged at 6.7%, leading to a cash gap increase of 12.4% annually. "This is an unsustainable model.
We're in a debt trap, relying on state funds and loans to cover losses, only to repay them with interest the next year," he emphasised. Despite years of govt investment in infrastructure and loss of funding, the gap persists.
About 15% of UP's non-committed budget—excluding salaries—is allocated to the energy sector, with 90% of that going toward subsidies and loss funding. This diverts funds from critical infrastructure development and welfare schemes. Privatization, Goel argued, would free up these resources for more productive uses, such as building schools, hospitals, or modernising the grid.
Addressing Consumer and Employees' Concerns Consumers:Privatisation often sparks fears of tariff hikes and job losses, but UPPCL is keen to dispel these concerns.
For consumers, Goel clarified that tariffs are regulated by the state's regulatory commission, and privatisation is not inherently linked to price increases. In fact, private players are expected to reduce line losses and curb power theft, which currently burden honest, paying consumers.
"The honest consumer is indirectly subsidising those who don't pay," he noted. By improving efficiency, privatisation could stabilise or even lower tariffs for those who pay their bills on time.
The chairman drew parallels with successful privatisation models in Delhi, Odisha, Chandigarh, and Dadra Nagar Haveli, where consumer services have improved significantly. In Agra, where Torrent supplies power, middle-class consumers report reliable service, though challenges persist for low-income households unable to pay on time. Goel acknowledged these concerns but stressed that regulatory rules govern discoms, ensuring protections for vulnerable consumers.
"Electricity is a commodity. Just like a mobile bill, if you don't pay, service stops. But privatisation doesn't mean leniency will vanish—regulators will ensure fairness," he said.
Employees: UPPCL has taken proactive steps to ease concerns. "No one will lose their job," Goel, the 1995 batch IAS officer, assured. Employees of Purvanchal and Dakshinanchal have three options: one, continue with the private discoms on the same or better terms.
Second, return to UPPCL. Three, opt for voluntary retirement. Contractual workers, meanwhile, are likely to see increased opportunities as private discoms expand services to meet growing consumer demand.
"Private players are better paymasters," Goel added, noting that UPPCL's losses currently limit salary increases.
The Financial Imperative
The financial rationale for privatisation is stark. The cash gap per unit of electricity is Rs 4.31 for Purvanchal, Rs 4.08 for Dakshinanchal, Rs 3.53 for Madhyanchal, Rs 2.08 for KESCO, and Rs 1.51 for Paschimanchal.
These losses, coupled with Uttar Pradesh's low per capita electricity consumption of 723 units annually—compared to India's 1,331 and developed countries' 10 times higher—highlight the need for massive investment.
"Govt can't fund this alone. Private investment is the only way to bridge the gap and meet rising demand," ," said Goel. Privatisation will involve selling 51% equity in the discoms, with govt retaining 49% share.
As performance improves, the value of govt's stake will rise, as seen in Odisha, where private discoms have started paying dividends within five years. A stakeholder consultation on April 12 revealed strong private sector interest, signalling confidence in the model.
A Broader Vision: Renewable Energy and Beyond
Beyond privatisation, UPPCL is also focusing on renewable energy to meet its renewable consumption obligation.
A recent 2,000 mega watt solar tender, along with agreements for wind, hydro, and battery storage, reflects a commitment to diversifying the energy mix. These efforts aim to reduce reliance on fossil fuels and align with India's sustainability goals.
A Message to Skeptics
To those wary of privatisation, Ashish Kumar Goel pointed to other sectors like telecom and airports, where private participation has driven innovation and improved services.
"If we want a developed India by 2047, we can't rely on outdated systems. Electricity is the lifeline of modern society—powering hospitals, industries, and data centres. With aspirations rising, consumers demand uninterrupted, high-quality supply, which requires significant investment and efficiency," he said.
He further said, "UPPCL's privatization push is not without challenges. A five-year transition period means results won't be immediate, and public perception remains a hurdle. Yet, we are optimistic, as we have witnessed the successful models of other states, and there is an urgent need to break free from the debt trap."
"This is a win-win for consumers and govt," he concluded.