Digital Technology - The fairy godmother?
India has a well recognized set of issues in the power sector, especially in power distribution. Losses are high, and growth only tends to make them higher, making the business potentially unattractive. Customers are generally dissatisfied with reliability and quality. Distribution companies (Discoms) seem to be facing insurmountable challenges... Is there any solution in sight for this seemingly never-ending crisis?
It was not too long ago that we had a similar situation in the telecom industry. We had only about 50 lakh phones in 1991. Ordering a new phone line took months, if not a year or more. Distance-calling rates (STD and ISD) were among the highest in the world. The phone was virtually out of reach for most of India and limited to a small section of the society, largely the elite in cities and select villages.
Fast forward to the present: India has probably the cheapest phone service and a wide and dense phone network of good quality by global standards. India has over 30 crore phones and this number is growing at one of the fastest rates in the world.
Another significant interdependent revolution has taken place in the IT sector. India has leapfrogged from nowhere to a leadership position in the global IT and ITES market over the last two decades. Indian Railways has successfully delivered a turnaround, giving hope to other core sectors. Financial markets and banks are setting global standards for best-of-breed processes and systems.
So is there something for the power sector in these rags-to-riches stories from our own backyard? Are there parallels that can be drawn to derive some actionable insights to help transform Discoms to profit-making, world-class organizations?
Is there a fairy godmother who was responsible for transforming these sectors?
Fast forward to the present: India has probably the cheapest phone service and a wide and dense phone network of good quality by global standards. India has over 30 crore phones and this number is growing at one of the fastest rates in the world.
Another significant interdependent revolution has taken place in the IT sector. India has leapfrogged from nowhere to a leadership position in the global IT and ITES market over the last two decades. Indian Railways has successfully delivered a turnaround, giving hope to other core sectors. Financial markets and banks are setting global standards for best-of-breed processes and systems.
So is there something for the power sector in these rags-to-riches stories from our own backyard? Are there parallels that can be drawn to derive some actionable insights to help transform Discoms to profit-making, world-class organizations?
Is there a fairy godmother who was responsible for transforming these sectors?
Comments
Nandan, its really interesting to think that after telecom, IT and railways ,our power sector will come on track. But i believe that our power sector still lacks competition and she is the mother of all reforms.
Posted by: vikash | July 9, 2008 12:33 PM
Vikas, I think complete competition in distribution sector in India will take some time. Electricity Act 2003 has provisions for open open access in Transmission from outset and open access in Distribution in phases. Now it’s for states to take the call to roll out open access; some state regulators have already allowed competition in electricity retail for large consumers at specified voltage levels and contract demand.
The immediate priority for the sector is to become commercially viable and technology can certainly help in improving the financial health of the sector. Once this is achieved, this sector will attract more investments and soon we may have choices of electricity suppliers as we have of telecom service providers.
Posted by: Mitul Thapliyal | July 28, 2008 09:30 AM
It was good to read Nandan's view on the telecom industry ( i spent 10+ years in this vertical)- a large portion of this growth was due to the fact that once the government opened up the sector, strong & committed entreprenuers were able to bulldoze their way through the maze of regulations & redtape and create a business of scale and size which was difficult to ignore - customers, who had to wait years for a telephone line, today are king and have the power to choose among a variety of options and service providers go out to retain them with efforts on service and quality.
I currently work at Kotak Mahindra Bank - the changes in the financial services sector have also been positively significant. It's actually quite unimaginable that today you can actually do retail banking transactions without visiting a bank - something unheard of 10 years back.
The power sector (both generation & distribution)will need to see similar opening up by the government and clearer/transparent policies and then you would have business houses (besides the Tatas & Reliance) putting their foot forward (large investments notwithstanding) to script a rags-to-riches story.
Posted by: S Sanjay | August 26, 2008 08:54 AM
Is India really in the leadership position in the IT sector as you claim. We have not a single company with any form of intellectual property in this space. It's sometimes dangerous to drink one's own coolade.
Posted by: Sam Miller | September 4, 2008 11:28 PM