THE newly appointed union power minister in the NDA government has swiftly pushed forward with privatisation initiatives since taking office. A key move is the directive to unbundle the Damodar Valley Corporation (DVC) into three separate entities for corporatisation—one for generation, one for transmission, and one for distribution. This unbundling plan was announced publicly without prior discussion or agreement with critical stakeholders, including employees, engineers, officers, and pensioners of the DVC.

Founded in March 1948 through the Damodar Valley Corporation Act passed by the Indian Parliament, the Damodar Valley Corporation (DVC) was a groundbreaking initiative. It transformed the flood-prone Damodar River into a controlled resource, aiming to develop and benefit the 25,000 sq km valley region and its inhabitants. The Act emphasized the project's significance by mandating joint participation from the central government and the state governments of West Bengal and Bihar (now Jharkhand) for its construction and maintenance. The DVC's primary purpose, as outlined in the Act, was the comprehensive development of the Damodar Valley.

The Act encompasses several key objectives: flood control, irrigation to enrich barren topsoil, environmental protection through reforestation, and the promotion of social forestry to combat soil erosion. Additionally, it aims to develop the mineral-rich Bihar Plateau and ensure the holistic socio-economic progress of the Damodar Valley’s residents, alongside its mandate for power generation. For the past 76 years, DVC and its workers have been dedicated to these principles, often at great personal sacrifice.

One of the primary functions assigned to the Corporation is the promotion and operation of schemes for the generation, transmission, and distribution of electrical energy. The intent of the Act is further exemplified in the clause concerning the fixation of charges for electrical energy, which clearly states that "The Corporation may impose a retail rate schedule as it deems necessary or desirable to encourage the use of electrical energy."

The Act also specifies that “the participating governments shall provide entire capital required by the corporation for the completion of any project undertaken by it and the net deficit, if any, shall be made good by the governments concern”. Clearly, the DVC's purpose is the social upliftment of the Damodar Valley's residents, focusing on holistic socio-economic development rather than merely generating financial profit. Despite this, the current Modi 3.0 government is aggressively pushing to unbundle the DVC, a move even the same government refrained from during its decade in power.

FALSE MYTH OF UNBUNDLING

A prevalent justification for the aggressively promoted agenda of unbundling is the claim that it will address the financial losses of public sector power utilities. However, this argument does not apply to the Damodar Valley Corporation (DVC), as it is not a state electricity board but a statutory corporation established for a clearly defined and specific purpose.

On the other hand, the reality of unbundling state electricity boards is equally concerning. In 1992-93, before unbundling was introduced, the total financial losses in the power sector amounted to Rs 4,600 crore, largely attributed to extraneous factors and social obligations. However, following the introduction of the 1995 DISCOM reform, accumulated losses soared to approximately Rs 26,000 crore by March 2001, escalating at a rapid pace. Furthermore, India became one of the worst-performing countries in terms of power supply reliability among developing nations.

Despite continuous increases in retail tariffs (from 105.4 paise per kWh in 1992-93 to 240 paise per kWh in 2001-02), the growing disparity between the average cost of supply and average revenue realisation was exacerbated by rising input costs. In 1990-91, the financial gap was 24 paise per unit, which widened to 92 paise per unit by 2000-01. This deepening financial crisis was driven by higher input costs due to foreign capital inflows, guaranteed exorbitant profits, and the use of costly imported coal and liquid fuel. Additionally, the country faced an energy shortage of about 8.3 per cent and a peak shortage of around 11.3 per cent.

In the mid to late 1990s, states such as Orissa, Haryana, Andhra Pradesh, Uttar Pradesh, Rajasthan, and later Karnataka implemented unbundling reforms to qualify for World Bank loans. They agreed to a three-pronged reform program: unbundling integrated utilities into separate sectors for generation, transmission, and distribution; privatising generation and distribution companies; and establishing independent regulatory commissions to oversee these utilities. However, these reforms failed to address the underlying issues and only deepened the crisis further.

Today, despite a series of power sector reforms and the unbundling of nearly all state power utilities, the total debt of the Indian power distribution sector stands at approximately Rs 6.5 lakh crore. This stark reality clearly demonstrates that the unbundling strategy has been a significant failure in improving the financial health of the sector.

In this context, it is worth noting with pride that, despite numerous challenges, the DVC Power Sector remains a profitable segment. It earned revenues of Rs 21,799 crore in 2021-22 and Rs 25,005 crore in 2022-23, achieving a notable profit of Rs 339 crore in the last fiscal year. Remarkably, DVC, in its integrated form, consistently contributes to the government exchequer while effectively serving the people of the Damodar Valley and other states.

UNBUNDLING: A PATH TO PRIVATISATION

Unbundling does not inherently improve operational efficiency; in fact, it often has the opposite effect. When an institution is disintegrated and its capital capacity reduced, its ability to absorb economic shocks and manage market fluctuations diminishes. A larger capital base enhances a firm's resilience and operational control. The integrated power utility structure, with its synergy between generation, transmission, and distribution, along with a greater capital volume, provides comprehensive oversight and enables the formulation of effective managerial policies.

Notably, all of the top 10 global power companies operate as integrated utilities, encompassing generation, transmission, and distribution. Of these, nine are private, with the exception of China’s State-run power utility. Similarly, in India, private corporations in the power sector are actively working to expand and develop integrated power services.

If DVC's strength is undermined by unbundling, the adverse effects will cascade through the generation and transmission sectors, ultimately leaving the Corporation vulnerable to private capital. This would further jeopardise the livelihoods and security of thousands of workers and pensioners who depend on DVC.

This destructive process of disintegration is designed to erode the capacity of the DVC Power sector through both horizontal and vertical unbundling, while private firms have never been subjected to such measures. Global experience shows that unbundling often paves the way for the privatisation of state utilities at bargain prices. This has been decisively demonstrated by the outcomes observed with state electricity boards.

DVC employees have actively begun campaigning among all stakeholders and the people of the valley. The Electricity Employees Federation of India (EEFI) has stepped in, and electricity employees nationwide are preparing to launch a broad movement against this threat. Task is clearly political: to rally both the residents of the Damodar Valley and DVC employees. The message is clear: no further unbundling, no further privatisation – protect DVC and uphold the social right to electricity.