Consumer Issues
Power supply franchisee model cuts losses, improves supply quality

While the franchisee model in power supply has helped to significantly reduce losses, there is room for improvement in areas like arrears recovery, bidding process and franchisee monitoring, says an NGO report

Franchisee models for power supply could significantly help to cut down losses. This is an observation made regarding Bhiwandi town, which had high technical and commercial losses in the pre-franchisee period, says a report by Prayas, a Pune-based NGO which specialises in energy research. Supply quality has also improved considerably after implementation of the franchisee model.
However, recovery of arrears and lack of customer confidence in the franchisee for metering and billing systems remains a problem, says the NGO.
The report, made public on Wednesday, revealed that the franchisee, Torrent Power Ltd (TPL), has been able to significantly reduce losses in the Bhiwandi circle. In the first two years of operation—since the agreement was inked in 2007—aggregate technical and commercial losses have come down from 63% to about 19% as per the data made available by the Maharashtra State Electricity Distribution Company Ltd (MSEDCL). These reductions in the technical and commercial losses have been brought about by a capital infusion of over Rs200 crore in the first year of operations to upgrade the distribution system coupled with several management and administrative changes.

The study also reported improvement in the supply quality post implementation of the franchisee model. Consumers in Bhiwandi are finding it much easier to get new connections. Transformer failure rates and accidents have reduced significantly and about 66% of respondents surveyed by Prayas opined that the change has been good for consumers, stated the report.

However, lack of post-franchisee monitoring by the licensee has also been highlighted as an important shortcoming in the model.

MSEDCL handed over power distribution in the power-loom town of Bhiwandi to TPL under a 10-year franchisee agreement in January 2007. The urban, input-based franchisee model is considered to be the next step in distribution reforms. Prayas carried out a detailed study of this model for the Planning Commission of India.

The input-based franchisee model, as implemented in Bhiwandi, is an arrangement under which a private company (in this case, TPL) was appointed to manage distribution business of the Bhiwandi circle of MSEDCL for a period of 10 years. The franchisee pays an agreed input rate to the licensee for input energy injected into the franchisee area.

Though there have been significant reduction in the losses and improvements in the supply services, a certain amount of customer dissatisfaction on billing rates and failure in recovering arrears remains a serious concern. As per the Prayas survey, a few consumers do not have confidence in TPL’s metering and billing systems. High bills and fast-moving meters were common complaints voiced by consumers during the survey.

As per the report, TPL has collected less than Rs10 crore towards accumulated arrears till date. The claimed total arrears amounted to Rs1,000 crore, according to the NGO.

The franchisee agreement stipulates certain processes and timeline (quarterly and annual) for undertaking audits of average billing rates, subsidy claims, metering & billing systems and customer databases. In case of the Bhiwandi franchisee model, even after two years after signing of the deal, none of these audits had been completed by the franchisee and independent auditors assigned for such exercises.
Some lacunae in the bidding process for such franchisee models have also been reported in the study. In case of the Bhiwandi model, major changes in the franchisee terms were affected after completion of the bidding process. The request for proposal (RFP) circulated to all prospective bidders contained only principles of the franchisee agreement, and the actual franchisee agreement was prepared after awarding letter of intent to the winning bidder.

In Nagpur, where a similar model was implemented, there was a major improvement over the Bhiwandi bidding process. The RFP contained a full-fledged franchisee agreement and not just principles of agreement. But here the shortcoming was in the bid evaluation process. A three-tired entity comprising MSEDCL, the High Court and the Maharashtra Electricity Regulatory Commission (MERC) failed to point out un-viability of the winning bid. These two instances, of major shortcomings in the process of awarding franchisee contracts in Bhiwandi and Nagpur highlight the underlying dangers and weakness in the ability of State-run utilities to conduct a transparent and rational bidding process, stated the report.

- Amritha Pillay [email protected]


Trading MFs through brokers may not be cost-effective for investors

SEBI’s move to attract more retail investors in MFs can succeed only if it imposes measures to lower transaction costs

In a move to increase the reach and availability of mutual funds (MFs), market regulator Securities & Exchange Board of India (SEBI) has proposed trading of mutual fund units through stock brokers. While this move, which SEBI plans to introduce by March 2010, may be well-intentioned, there are certain issues that need to be ironed out for it to be a hit among retail investors.

Existing MF holders who do not have demat accounts need to open depository and brokerage accounts. Opening a brokerage account involves an initial deposit and various expenses such as annual maintenance charges and brokerage charges per transaction. According to industry sources, the commission structure will roughly be equal to that of a delivery-based brokerage, that is, 0.25% to 0.50% of the total transaction value.

So, from investors’ point of view, the entry load, which SEBI abolished in August 2009, will be replaced by the cost of opening a demat account and payment of brokerage charges for each transaction.

For investors holding physical MF units, the charges for dematerialisation would vary from broker to broker. “It could be a fixed charge of, say, Rs25 plus Rs3 per MF statement. However, the charges will have to be approved by SEBI and the stock exchanges,” said Chandrashekhar Layane, senior vice-president, FairWealth Securities.

In addition, “a broker can charge 1% or 1.5% as management fees based on the total assets under management (AUM) of the client, subject to SEBI approval. For this to happen, further clarification is required from SEBI,” said Mr Layane.

Earlier, MF distributors received commissions when investors bought MF units, but not when investors sold units. However, stockbrokers can charge brokerage from both buyers and sellers.

Brokers may also levy advisory charges, although their knowledge and expertise in dealing with MFs is open to question. As brokers are more conversant with equity markets, they may not be inclined to focus on MF investors.

Also, there is no clarity yet on the NAV (net asset value) at which MF units will be traded through stockbrokers. Currently, MF houses calculate the NAV of a scheme based on the previous day’s share prices. Moreover, trading MF units through the stock exchanges will expose them to a higher level of price volatility.

According to SEBI , “Stock exchanges with their reach covering over 1,500 towns and cities and through over 200,000 stock exchange terminals can be used for facilitating transactions in MF schemes. The stock exchange mechanisms would also extend the present convenience available to secondary market investors to MF investors.”

SEBI’s new move to increase retail participation in mutual funds will succeed only if it reduces the transaction cost by implementing norms that dissuade brokers from overcharging investors through a plethora of ‘hidden charges’.
 Ravi Samalad [email protected]



Switchover from RelInfra to Tata Power plagued by initial hiccups

Consumers who have applied for connections from Tata Power are facing problems with issues related to meter change and security deposits

For the first time, consumers in Mumbai can now enjoy the right to avail services from the power utility of their choice. But this switchover from Reliance infrastructure (RelInfra) to Tata Power is coming along with its own crop of initial hiccups.

The interim order passed by the Maharashtra Electricity Regulatory Commission (MERC) on 15 October 2009 states that Tata Power will be allowed to supply power to those existing consumers of RelInfra who wish to receive power from Tata Power.

“I have not got the connection yet. I had applied for it on 13 July 2009. As per the MERC order, the switch has to take place on the meter-reading day. My meter reading was done on the 4th of this month, the bill was produced on the 7th of this month and for the joint meter reading, the officials from Tata Power and Reliance Power came later on the 10th. They could not connect me on the 10th, as my current bill was not paid, since I had received it only two days back. Later on enquiring with Tata Power I was informed that as my last bill was shown unpaid on the connection date, they could not do the switchover as RelInfra wants the last bill to be paid before the switchover takes place. Tata Power volunteered to make the switch within four days, once I pay my bill,” said Diana Dias, a customer with RelInfra who has applied for a switchover to Tata Power.

While clearance of the final bill from the earlier utility provider is one glitch in the switchover, settlement of the security deposit has turned out to be another. “I approached RelInfra and requested them to adjust my security deposit against my bill and (told them that) I would readily pay the balance along with the prorate payment till the day of connection. I was ready to pay for a couple of days extra also. At first they agreed to my offer and volunteered to tell me the exact amount to be paid, but the next day they turned me down. I haven’t yet given up since it was unknown to me and most impractical that I would have to pay a bill that I had just received, else my switchover would not take place,” Ms Dias added. She is not the only one with security deposit woes.

“RelInfra has to pay me an interest of 12.5% per year on the Rs1,460 deposit; that money has not been given to me either by cheque or (adjusted) in the bill,” complains another consumer Rakshpal Abrol, who switched over from Reliance Infra  to Tata Power last month.

Sandeep Ohri, who has been active in pioneering the switchover of power from Reliance Infrastructure to Tata Power, got his connection easily, but not without the initial glitches. “I have been fighting for this switchover from the time the order was passed in July 2009. I had approach RelInfra several times to disconnect their services, but they refused to remove the meter. Tata Power had already provided me with a new meter; however, Reliance refused to remove the existing one. On being told that I would remove it myself, they threatened that they would implicate me under penalty for tampering of the meter. This was resolved later due to the intervention by MERC, with the interim order on how the switchover would take place,” said Mr Ohri.

“They knew I would take up the issue with MERC and hence my switching to Tata Power from RelInfra was smooth. It was done in twenty minutes,” added Mr Ohri.

 However, Mr Ohri also adds that for various other customers, “Reliance is refusing to remove its meters. They are also spreading a lot of other misinformation and rumours that their tariffs are going to be reduced.”

“The tariff determination of all distribution licensees in the State is a prerogative of MERC. As a policy, RelInfra prefers not to react to rumours and speculations of committing any discount or tariff cut-down,” explained a spokesperson from Reliance Infrastructure in a response to an email from Moneylife.

“RelInfra even threatened a few people that if they do not pay the bill they will not allow a Tata meter to be installed for those who have already done the switch,” added Ms Dias.

Rakshpal Abrol shares a similar experience, “I have been receiving a number of phone calls over the past 15 days and they (Reliance customers) all have been facing the same problem of refusal from Reliance to change the meter.” Mr Abrol is the president of an NGO, Bharatiya Udhami Avam Upbhogata Sangh, working actively for clients who want to switch over from Reliance Power to Tata Power.
“The major problem right now is that of the final bill and security deposit. There are people who received the bill as per the date the joint meter reading was taken, but the security deposit was not adjusted in that bill. Reliance on one side is saying you go across the counter and pay the final bill by deducting the security deposit. The person at the counter says he is not informed, and would only accept full bill payment. Now, I get the news that they have not yet prepared the final bills. RelInfra mentioned that for receiving the security deposit, one should give an application letter stating the account number and the money would be transferred into the account on the seventh day. No cheques would be given. But this can be done only after the so-called final bills have been made and paid,” added Ms Dias, who is also the head coordinator and founder member of VOIC (Voice of I C Colony) which has taken up the initiative along with other local NGOs, in and around I C Colony covering around 10,000 consumers in Mumbai’s Dahisar and Borivali areas. The NGO aims at educating and helping these consumers take an informed decision for switching from RelInfra to Tata Power.

“However, we should give both the companies some benefit of doubt because it is their first time. But they should have had the required procedures in place, considering the switch has been in the pipeline since last three-four months,” Ms Dias concluded.

 “RelInfra denies the allegations as they are misconceived and devoid of facts and reiterates that it is facilitating smooth migration of consumers to Tata Power (TPC) in accordance with the MERC guidelines on Operating Procedure for changeover dated 15 Oct 2009,” said the Reliance Infrastructure spokesperson. Officials from Tata Power have refused to comment on the issue, citing the reason of it being “a silent period” till 26 November 2009 on the interim order. As per sources, around 500 Tata switchover connections have been already given- Amritha Pillay [email protected]





5 years ago

how to get d application form ?


6 years ago

i want to change my reliance meter to tata power . Ireside at mira road so plz mail me theconcern persons address and

tushar patel

6 years ago

we want to change my electricity connection from reliance to tata power please guide to how to change connection.
my mo no.9221250973
add:-patel chawl, opp ganesh temple, 90 ft .road , pantnager, ghatkopar (e)


7 years ago

comments given bellow.


7 years ago


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