As recently as 2009, the electricity supply industry in the state of Madhya Pradesh in central India was facing a range of apparently insurmountable problems. With a shortfall of some 15% between power supply and demand, widespread rationing in rural areas resulted in less than 12 hours’ supply per day. At the same time, overloaded equipment and underinvested systems meant technical and commercial losses of 37%, and the industry’s ageing organisational structures were ill-equipped for change.
To improve the lives of people across Madhya Pradesh and enable businesses to thrive, these serious problems needed to be solved. Fast forward to 2014, and the progress made in just five years is truly remarkable.
Today, Madhya Pradesh enjoys 24 hours’ supply across the state – including rural areas – and has provided access to electricity to 1.42 million new consumers. Private sector generation accounts for 32% of total capacity, and the state transmission utility has one of the best availability ratings and lowest loss levels in the whole of India. Meanwhile, in distribution, private suppliers have been selected for retail supply in three cities on a public-private partnership (PPP) basis.
What’s more, the electricity sector reforms are already beginning to boost the local economy and improve quality of life. For example, they contributed to the state’s agriculture sector achieving nearly 25% revenue growth in 2013-14.
Acting as advisers to the power entities, and working closely with a wide array of public, private and international development sector stakeholders, PwC India has played a pivotal role in this dramatic transformation. Initially engaged by the UK Department for International Development (DFID) – which initiated the reform programme – PwC India is now working directly for the power companies. The government’s aggressive electrification programme was funded by the Asian Development Bank (ADB). Among other actions, the state government’s role has included undertaking structural and institutional reforms, hiring over 5,000 young engineers, and developing a detailed strategy for ensuring 24-hour power supply to all consumers.
The success of the reforms reflects a number of factors. One of the most important was the state government’s clear vision and strong commitment to achieving this dramatic turnaround, backed up by the support of international development agencies in providing technical assistance and loans. Equally vital were the efforts of the power company staff and PwC India consultants in defining and implementing the necessary actions, including financial restructuring, loss reduction, organisational change, enhancements to procurement processes and manuals, regulatory and commercial responses, and programme management.
Mohammed Suleman, Principal Secretary Energy, Government of Madhya Pradesh, says: “Distribution is the backbone of the power sector, and improvement in the financial position of distribution companies in Madhya Pradesh is very remarkable. PwC India played a significant role as an adviser to the power sector – not only in distribution but more in the entire planning process.”
Kameswara Rao, PwC India Industry Leader for Energy, Utilities and Mining, says: “Speed was of the essence, and we were able to leverage our strong industry knowledge, bring in our experience of reform life-cycle, and deploy dedicated onsite teams in three cities in the state to make this happen.”