1

CHAPTER -1

INTRODUCTION

[1] Human Resources management concept, Importance, Nature and

Scope.

(1.1) Human Resources Management Concept

(1.2) Importance of Human resources management

(1.3) Nature of human resources management

(1.4) Scope of human resources management

[2] Gujarat Electricity Board (GEB)

(2.1) Origin of G.E.B

(2.2) Development of G.E.B

(2.3) Need for reformation in G.E.B

(2.4) Gujarat Electricity Board Transformation

[3] PASCHIM GUJARAT VIJ COMPANY LIMITED (PGVCL)

(3.1) Origin of PGVCL

(3.2) Development of PGVCL

(3.3) Organisation Structure of PGVCL

2

The success of any organisation depends on the quality of its human resources.

Human resources are the most important and valuable assets, every organisation has

in the form of its employees. Dynamic, competent and motivated human resources

build dynamic organisation and enable organisation to achieve its goals. An

organisation’s performance and resulting productivity are directly proportional to

quantity and quality of its human resources. In the management of four “M” s-men,

machines, materials and money, the most important is “M” for management of men

or human resources. therefore an organisation should continuously ensure that the

dynamism, competency, motivation and effectiveness of its human resources remain

at high level, which requires sound human resources management. In fact one of the

fundamental activity areas of management is the management of human resources.

Now we shell discuss in detail human resources management concept, its

importance, nature and scope, development of G.E.B.s, development of PGVCL and

organisation structure of PGVCL in following pages.

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1. Human Resources Management –Concept, Importance, Nature

and Scope

(1.1) Human Resources management Concept

Akio Morita, the founder of Sony Corporation, once said, “there is no ‘magic’

in the success of Japanese companies in general and Sony in particular. The secret of

their success is simply the way the treat their employees.” Under Morita, the whole

process of recruitment, selection, training and development, performance appraisal, and

rewards at Sony was built on the premise that employees were the most valuable part of

the company. Indeed, it is they who are its permanent associates and it is they who

serve the organization with their work, talent, creativity, and drive. World’s leading

food company Nestle’s CEO, Peter Brabeck also pointed out that every single person in

the organization should ask himself or herself –is there anything I can do add a little

more value to our company? This clearly shows how importantly people are treated in

this organization.

The concept of HRM emerged in the mid-1980s against the background of the

works of famous writers on management, like Pascale and Athos (1981) and Peters and

Waterman (1982), who produced lists of the attributes that they claimed characterized

successful companies.

The American Society for Training & development (ASTD) has developed a

Human Resources Wheel in 1982 (fig 1.1) highlighting different functions of HRM

leading to quality of work life, productivity and readiness for change.

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• Human Resource Management

Fig 1.1 Human Resource Wheels, Source: ASTD, 1983

• T & D Focus: Identifying, assessing and through planned learning-helping

develop the key competencies which enable individuals to perform current or

future jobs.

• OD focus: Assuring healthy inter-and intra-personal relationships and helping

group initiate and manage change.

• HRP focus: Determining the organization’s major HR needs, strategies and

philosophies.

• Selection and Staffing: Matching people and their career needs and capabilities

with job and career paths.

• Personnel research and information systems: Assuring a personnel information

base.

• Compensation /benefits focus: Assuring compensation and benefits fairness and

consistency.

• Employee assistance focus: Providing counseling to individual employees, for

personal problem-solving.

• Union /Labour relations focus: Assuring healthy union/organization relationships.

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HRM concept was made by the Machigan school (Fomborn et al., 1984). They

explained the human resources cycle that consists of four generic process of function.

There are:

1. Selection –Matching available human resources to jobs

2. Appraisal –Performance management

3. Rewards –It must reward short as well as long-term achievements.

4. Development –Developing high quality employees.

They suggest that the HR function should be linked to the line organization by

providing the business with good databases, by ensuring that senior manager give

HR issues as much importance as they give to other functions.

Figure 1.2

The Human Resource Cycle

Source: The Human Resources Cycle. Fomburn et al. (1984)

The Harvard Framework of HRM was developed by Beer et al. (1984). This

framework is based on the believe that the problems of historical personal

management can only be solved when general managers developed a view point of

how they wish to see employees involved in the developed by the enterprise and of

what HRM policies and practices may achieve those goals. Without either a central

philosophy or a strategic vision –which can be provided by the general managers –

HRM is likely to remain a set of independent activities, each guide by its own

practices and traditions. The Harvard School suggested that HRM has two

Selection Performance management

Rewards

Performance

Development

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characteristics features: (a) line managers accepts more responsibility for ensuring the

alignment of competitive strategy and personnel policies; (b) the personnel function

has the mission of setting policies that govern how personnel activities are developed

and implemented in ways that make them more mutually re-enforcing.

Walton (1985) has further expanded the concept of HRM stating that the

new HRM model is composed of policies that promote mutuality –mutual goals,

mutual influence, mutual respect, mutual rewards and mutual responsibility. The

theory propounds that policies of mutuality will elicit commitment which in turn will

yield both economic performance and greater human development.

David Guest (1987, 1989a, 1989b, 1991) has taken the Harvard model and

developed is further by defining four policy goals which he believes can be used as

testable propositions:

� Strategic integration –the ability of the organization to integrate HRM issues into

its strategic plans.

� High commitment –behavioural commitment to pursue the agreed goals and

attitudinal commitment reflected in strong identification with the enterprise.

� High quality –refers to all aspects of managerial behaviour that bear directly on the

quality of goods and services.

� Flexibility –functional flexibility and the existence of an adaptable organization

structure with the capacity to manage innovation.

Story (1989) has distinguished between hard and soft version of human

resources management. The hard approach to HRM emphasizes the quantitative,

calculative and business strategic aspects of managing the head count resource in as

‘rational’ a way as is done for any other economic factor, whereas the soft model of

HRM traces its roots to the human relations school, emphasizing communication,

motivation and leadership. It involves treating employees as valued assets, a sources

of competitive advantage through their commitment, adaptability and high quality of

skills.

Karen Legge(1989) had defined the HRM theme that human resource

policies should be integrated with strategic business planning and used to reinforce an

appropriate (or change an inappropriate) organizational culture, that human resources

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are valuable and source of competitive advantage that they may be tabbed most

effectively by mutually consistent policies that promote commitment and which, as a

consequence, foster a willingness in employees to act flexibly in the interest of the

organization in its pursuit for excellence.

Keith Sisson (1990) suggests that there are four main features increasingly

associated with HRM.

� Stress on the integration of personnel policies both with one another and with

business planning more generally.

� The focus of responsibility for personnel management no longer resides with HR

specialist.

� Focus shifts from manager, trade union relations to management, employee

relations and from collectivism to individualism.

� Stress on commitment and the exercise of initiative, with managers now donning

the role of enabler, empowerer and facilitator.

Arm strong (1999) The overall purpose of HRM is to ensure that the organization

is able to achieve success through people. HRM has been defined as a strategic

and coherent approach to the management of an organization’s most valued assets

–the people working there who individually and collectively contribute to the

achievement of its goals.

Through the development of personnel management in UK and USA was

largely voluntary, in India it emerged because of the governmental interventions and

compulsions. In the beginning of the 20th century, various malpractices in the

recruitment of workers and payment of wages were prevalent which caused a colossal

loss in production due to industrial disputes. The Royal Commission of Labour in

India (1931) under the chairmanship of J.H. Whitley recommended the abolition of

the ‘Jobber System’ and the appointment of labour officers in industrial enterprises to

perform the recruitment function as well as to look after the welfare of the employees.

After independence, a labour welfare officer was identified as personnel manager

created by legislation under Section 49 of the Factories Act, 1948. The role of a

personnel manager was more of a custodian of personnel policy implementation and

compliance to different acts of the Factories Law. Two professional bodies were

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formed namely, Indian Institute of Personnel Management (IIPM) at Kolkata and the

National Institute of Labour Management (NILM) at Mumbai. In 1980s, these two

professional bodies merged together and formed the National Institute of Personnel

Management (NIPM), headquartered at Kolkata. In the year 1990, another milestone

was achieved by renaming of American Society for Personnel Administration (ASPA)

as Society for Human Resource Management (SHRM). Over the years, a new

approach –the Human Resources Management –has emerged which focuses more on

developmental aspects of human resource with a pragmatic and flexible approach.

Thus, among the most critical tasks of a manager are the selection, training

and development of human resource, which will best help the organization meet its

goals. Without competent people of the managerial level –and indeed at all levels –

organization will either pursue inappropriate goals or find it difficult to achieve the

desired goals. Human dynamics plays a pivotal role in surmounting obstacles,

defusing complex situation and achieving organizational goals. It is because of this

reason that some organizations succeed in spite of major obstacles, environmental

changes and challenges, while others crumble rather quickly under external pressures.

The former types of organizations are generally dynamic bodies with tremendous

learning abilities which enable them to adapt and cope with environmental challenges,

while the latter are often caught in their own whirlpool of past glories, heritage and

old-habits, styles and practices, thereby finding in extremely difficult to shift their

focus, learn new ways from others or introspect. Just like a man is known by the

company he keeps, an organization is known by the people it is comprised of.

Human resources management encompasses those activities designed to

provide, motivate and coordinate the human resources of an organization. In fact,

government report shows that approximately 73 per cent of national income is used to

compensate its employees. In additional to wages and salaries, an organization often

make sizeable investment in their human resources by way of recruiting, hiring, and

training people to fulfill its need for well –trained and experienced staff.

Human resources management is a modern them for what has traditionally

been referred to as personnel administration or personnel management.

In his famous level The Rebel, Albert Camus wrote, “man is the only creature

who can rebel against what he is”. The implications are very clear. We may not agree

9

with McGregor’s views that human beings are indolent. We have seen the

developments in observing human behaviour in terms of theory ‘X’, theory ‘Y’ or

theory ‘Z’. We know that human beings are dynamic and flexible but at the same

time, they are also conforming and rigid, sometimes unpredictable. And, in spite of

all this, they are an asset, and never a liability. This warrants the necessity of

understanding human beings from a variety of perspectives. Due to the social,

political and economic changes throughout the world, there have been clear

indications of organizations finding it increasingly difficult to maintain economic

stability, as a consequence of increasing global competition, fragmentation of mass

markets and a general decline in consumer demand. Countries are aware that

economic growth will be maintained at present rates only if greater value added

activities are generated. This implies successful emergence of a new generation of

technologically advanced and desirable products together with a trained, and

motivated workforce to produce them. The internationalization of the productive

processes have raised new problems of control, motivation and appraisal across

economic and cultural boundaries. The dimensions of quality of work life are also

facing a global transition. The developments in Eastern Europe, the emergence of a

growing South East Asia and globalization of economies have created new challenges

for managers and behavioural scientists.

The changing internal environment in organizations calls for better

understanding of human resource management. The culture or climate of an

organization is made up of traditions, values, habits, ways of organizing, and

interpersonal relationships at work. Cultural is reflected in organizational structure,

strategy, systems, power and reward distributions, conformity, development

processes, motivational dynamics, organizational clarity, warmth and support

received by employees, leadership styles, standards of performance, and shared

subordinate values. An effective work cultural is flexible, integrated, decentralized,

performance-oriented, quality conscious, cooperative, collaborative, and supportive.

The major elements of HRM strategy and functions can be related to organizational

culture. Corporate mission /philosophy strategic plan give birth to culture in

organizations. Human resource planning defines the balance of demand and supply of

human resources in the organization, training and development play an important role

in instilling the culture, while goal setting and appraisal make the culture performance

10

oriented and enable it to operate with predictability, reward management reinforces

the culture and succession planning helps in maintaining the culture. Earlier,

productivity was the focus but now retention of human resource is considered to be

equally important. The labour welfare myth is over. The workers’ liberation of 60s

and 70s have been replaced by a new profit-oriented, quality-oriented pragmatism

which calls for integrating human resource planning with corporate strategy. In other

words, contemporary global focus is on integrating human resource functions with

industrial relations so as to achieve corporate excellence and develop organizational

citizenship.

[1.2] Importance of human resources management:

Human resources are assuming increasing significance in modern

organisation. Majority of problems in organizational setting are human and social

rather than physical, technical or economic. The failure to manage human resources

causes immense loss to the nation, enterprise and individual. Hence sound human

resources management is a principal functional area of management.

(1) There are different functional areas of management like production management,

marketing management, financial management, material management; all these are to

be performed by human resources. Hence all managers have to manage the human

resources of their respective departments to get effective result through and with the

people. Though there is a separate personnel/human resources development manager

to manage the human resources of the entire organisation.

(2) Proper human resources management enables an organisation to maintain a

balance between jobs available and job seekers according to qualifications and

needs and to provide suitable and most productive employment.

(3) It helps employees to know their strengths and weaknesses and thus enables them

to improve their performance and that of the organisation.

(4) It helps an organisation to know where opportunities are available for fuller

utilization of the known potentials of the employees.

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(5) It helps in generating valid data about employees for personnel functions like

training, development, placement, promotion etc.

(6) Sound human resources management can enable an organisation to understand the

nature, potentialities and limitations of its human resources, to development them

to actualize their full potentials, to utilize them to the optimal ability of the unit, to

maintain their quality and to amalgamate them with other resources, which can

lead to effective utilization of human resources.

(7) Sound human resources management enables an organisation to create right

attitude among the employees through effective motivation, to utilize effectively

the available human resources and thereby to secure willing cooperation of the

employees for achieving goals of the organisation and fulfilling their own, social

and other psychological needs of recognition, love, affection, belongingness,

esteem and self-actualization.

(8) It helps human resources of an organisation to sharpen capabilities required to

perform various function associated as individuals and to discover and exploit

their inner potential for their own and organizational development purposes and to

develop an organizational climate in which supervisor-subordinate relationships,

team work and collaboration among sub units are strong and support to the

professional wellbeing’s, motivation and pride of employees.

From above discussion it can be said that human resources management

provides direction to the management of the organisation to meet both the objectives

of the organisation and the needs of the employees. It has been proved as one of the

best method for achieving people effectiveness

[1.3] NATURE OF HUMAN RESOURCE MANAGEMENT:

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Human Resources Management (HRM) is a management function that helps

managers’ recruit, select, train and develops members for an organisation. Obviously,

HRM is concerned with the people’s dimension in organisations.

Specifically, the following constitute the core of HRM:

1. Organisations are not mere bricks, mortar, machineries or inventories. They are

people. It is the people who staff and manage organisations.

2. HRM involves the application of management functions and principles. The

functions and principles are applied to acquisitioning, developing, maintaining,

and remunerating employees in organisations.

3. Decisions relating to employees must be integrated. Decisions on different aspects

of employees must be consistent with other human resource (HR) decisions.

4. Decisions made must influence the effectiveness of an organisation. Effectiveness

of an organisation must result in betterment of services to customers in the form of

high-quality products supplied at reasonable costs.

5. HRM functions are not confined to business establishments only. They are

applicable to non-business organisations, too, such as education, health care,

recreation, and the like.

Obviously, HRM refers to a set of programmes, functions and activities

designed and carried out in order to maximize both employee as well as

organizational effectiveness.

[1.4] SCOPE OF HUMAN RESOURCE MANAGEMENT:

The scope of HRM is indeed vast. All major activities in the working life of

worker from the time of his or her entry in to an organisation until he or she leaves

come under the purview of HRM. Specifically, the activities included are HR

planning, job analysis and design, recruitment and selection, orientation and

placement, training and development, performance appraisal and job evaluation,

employee and executive remuneration, motivation and communication, welfare,

safety and health, industrial relations (IR) and the like. For the sake of convenience,

we can categories all these functions into seven sections – (I) Introduction to HRM,

(II) Employee Hiring, (III) Employee and Executing Remuneration, (IV) Employee

Motivation, (V) Employee Maintenance, (VI) IR, and (VII) Prospects of HRM (see

fig. 1.3)

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I

E

E

E

H

Figure 1.3

Scope of Human Resource Management

Now we shall discuss these functions of human resources management

with special reference to paschim Gujarat vij company ltd. In chapters that follow.

14

2 Gujarat Electricity Board (GEB)

[2.1] Origin of GEB.

Gujarat Electricity Board (GEB) was established along with the

formation of Gujarat State in the year 1960 under Section 5 of the Electricity (Supply)

Act 1948. Commencing with generation capacity of 315 MW and a consumer base of

1.40 million consumers, GEB today is the lifeline of over 7.3 million consumers

across the State of Gujarat.

During 1970s and 80s, the major thrust was on the supply of electricity

in the rural areas. It was largely due to GEB’s unwavering focus on rural

electrification that Gujarat became the first state to achieve the landmark of ‘100%

Electrification of Villages’. As per the 1991 Census, 17,940 out of 18,028 villages

have been electrified – which is notified as close to 100%.

GEB continues to focus on its key objectives concerning generation,

transmission and equitable distribution of power to achieve an all-round economic

growth of the State. Till date it has installed 1, 72,662 (as on 31-03-2003) transformer

centers and since four decades its per capita consumption has increased from 48

KWH (In 1960) to 932 KWH (as on 31-03-2003).

For the development of rural areas throughout state, GEB’s holistic

Rural Electrification Programme covers electrification of new villages, conversion of

electrified villages from conventional method to Solar System and supply power to

pump sets, Petaparas (Hamlets) and Harijan Bastis by availing finance mainly from

REC., New Delhi and State Government.

GEB stands committed to build Gujarat as the largest power hub of the

nation. With equal emphasis on serving both- the urban as well as the rural populace,

it ensures a harmonious and a balanced growth of the economy by achieving its twin

goals of social up-liftment of people as well as economic regeneration in the State.

[2.2] Development Of GEB.

Development of GEB in terms of selected physical indices viz.

Installed capacity, power generation, transmission, distribution, purchase of power,

sales of power, T&D loses numbers of sub-station and profit and loss.

15

1) Generation

GEB and GSECL, a company owned by GEB, contributes to 57% of

the total installed capacity of the state grid. The remaining 43% comprises of Central

Sector, Ahmedabad Electricity Company and Independent Power Producers.

2) Transmission

The state grid comprises of 400 KV, 220 KV, 132 KV and 66 KV

transmission and sub-transmission lines. the transmission department constructs,

operates and maintains transmission lines and substations for transmission of bulk

power generated at various generating stations as well as the state's share of power

received from the central government's generating plants and IPP to various parts of

the state through this network.

The network is managed by 10 transmission circle offices and 59

division offices (TR Division - 47 + Construction Division - 12)

3) Distribution

The distribution of power to the end user is one of the most critical

functions of GEB. Electricity is distributed to 8 million consumers through 1,45,000

Circuit Kilometer (ckm) of HT lines, 2,06,000 ckm of LT lines and with the help of

2,30,000 transformers.

The distribution department is responsible for supply of power to

residential areas, commercial complexes, streetlights, water works, agriculture and

irrigation sector as well as various industries. The consumer grievances cell functions

under the distribution department. This cell resolves complaints of consumers and

provides guidance as and when required.

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4) CONSUMER PROFILE OF GEB

Consumer profile of Gujarat Electricity Board is much diversified. In the financial

year, 2003-04 the company had sold 31001 MW of electricity to the consumers. As per figure –

1.4, 38 % of the total sales were part of agricultural customers whereas high voltage industrial

house had consumed 21 % as compared to 10.60 % consumed by industrial houses that required

low medium voltage. Total consumption of domestic residents was about 11 % while 4% of the

total electricity sold was being used by commercial segment. Major chunk of electricity around

12 % was supplied in bulk to the licensees. And lastly, 1% was used by railway, 0.43% was

used for public lighting and nearly 0. 02 % electricity was supplied for interstate consumption.

(Refer Table- 1.1 for total electricity sold out to different types of customers)

Figure - 1.4 Consumer Profile of Gujarat Electricity Board

(In terms of total sales) in FY 2003-04 Consumer Profile of GEB in 2003-04

Supply in Bulk to other (supply to

Domestic Residents

Licensees

interstate) 11%

12% 0% Commercial

4%

Public Water works

2% Industrial Low medium Voltage 10.60%

(Adapted from Administrative Annual Report of Gujarat Electricity Board FY 2003-04)

Agriculture Industrial High

Voltage

38%

21%

Traction Railway

Public Lighting

1% 0.43%

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Table – 1.1

Details of category wise sales of energy to different types of consumers in

Gujarat

(Adapted from Administrative Annual Report of Gujarat Electricity

Board FY 2003-04)

[2.3] Need for Reformation in GEB.

There are several reasons for urgent reforms mainly in the structure of

organization, in overall working style and in the efficiency of the organization namely Gujarat

Electricity Board. These reasons are

Sr. No. Types of Customers Units Sold (MW)

Domestic Residents

1 3523

Commercial

2 1114

Industrial (Low & Med.) Voltage

3 3289

Industrial High Voltage

4 6621

Public Lighting

5 136

Traction Railway

6 420

Agriculture

7 11605

Public Water works

8 607

Supply in Bulk to licensees

9 3661

other (supply to interstate)

10 25

Total

31001

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1. Lack of efficiency in generation of electricity

2. Higher transmission losses

3. Ineffective performance in distribution of energy

4. Political interference in internal functioning of the board

5. Power sector reforms drive in India

(1) Lack of efficiency in Generation activity of Gujarat Electricity Board

Generally, the generating capacity of any generation station of electricity is measured by its

plant load factor and auxiliary consumption. From the financial year, 1994-95 to FY 1998-99 the

plant load factor remained 60 % to 65 % on an average. (Figure –1.5) It showed that the

generating efficiency had a stagnant growth rate and required an improvement for better

functioning.

Figure- 1.5

Plant Load Factor status of GEB before reformation

Plant Load Factor of GEB

0.67 65.20% 65.00%

65.72%

0.66

63.74%

0.65

Perc

en

tage 0.64

0.63 60.50%

Plant Load Factor

0.62

0.61

0.60

0.59

0.58

0.57

1995 1996 1997 1998 1999

Year

As far as auxiliary consumption is concerned, the performance of Gujarat Electricity Board has

comparatively remained high. Basically, it was the power loss at the stage of generation. It

almost remained at 9% to 10% over the period of five years since 1995. (Figure -1.6) Such

19

auxiliary consumption contributed to the heavy generation losses and low rate of return on

investment as a natural corollary.

20

Figure –1.6 Auxiliary Consumption of GEB generating Stations

Auxiliary Consumption of GEB Generating Stations

10.28%

10.30% 10.02%

10.20%

9.90% 9.96%

10.10%

10.00% 9.71%

Percentage 9.90%

9.80%

9.70%

9.60%

9.50%

9.40%

1995 1996 1997 1998 1999

Year

(2) Higher Transmission Losses

Figure – 1.7 Transmission Losses of GEB

Transmission Losses of GEB

8.00% 7.14% 6.54% 7.10%

5.95%

of 7.00%

6.00%

Tra

nsm

itte

d

5.00%

4.00%

Per

cen

tag

e

3.00%

2.00%

Ele

ctri

ci

ty

1.00%

0.00%

1995 1996 1997 1999

Year

1995 1996 1997 1999

Higher transmission loss was the major motivational trigger for the reform in power

sector in Gujarat in general and Gujarat Electricity Board in particular. As per Figure – 1.7, it is

21

evident that from the FY 1995 onwards to 1999, the loss remained around 6% to 7% - of the total

percentage of electricity transmitted. The main reasons for such losses were huge amount

of power theft, obsolete equipment’s used for transmission of electricity and lack of effective

supervision especially on High Tension (HT) consumers.

(3) Ineffective performance in distribution of energy

performance in distribution of energy transmitted is being measured by

distribution losses. The minimum loss reflects the better position of power in terms of

distribution efficiency. Distribution losses are largely commercial losses arising from non-

metering, theft and non-collection of tariffs. In case of GEB, since the FY 1995, distribution

losses kept on mounting till FY 1999. (See Figure -1.8)

Figure –1.8

Distribution Losses of GEB before reformation

Distribution Losses

1999

7,272

1998

7,417

Years 1997

6,324

1996

5,963

1995

5,388

-

2,000 4,000 6,000 8,000

The matter was aggravated to such an extent that timely solution was urgently required.

(4) Political Interference in internal functioning of the Board

According to the 7th schedule of the constitution of India, which defines the share

of responsibility between the Union and the State governments of the Indian federal system, the

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power sector lies in its concurrent list. This means that the Union sets the policies and each State

is in charge of its implementation and of operationalizing the system in its respective territory.

This sector used to fall under the rules framed by Electricity Act, 1948, and its successive

amendments. (and since 2003, under the Electricity Act, 2003). The Electricity act, 1948 used to

specify that at the state level, the State Electricity Bards are responsible for the development and

operation of generation, transmission and distribution in the most economical way. The SEBs

have got an autonomous status. Each SEB reports to the Power secretary of its respective state

government, who is the highest civil servant under the State Minister of Power. State Electricity

Boards are attached to Planning Commission since the latter determines the desirable

investments and coordinate its functions with the other Ministry such as Ministry of Finance,

Coal, Railway, Water resources and Agriculture. Secondly, Central Electricity Authority (CEA)

has been providing technical advisory services to each SEBs.

Where organizational structure is found overlapping, it is quite obvious that

vested interests will play a vital role when there is going to be a constant interaction among

bureaucratic and political heads at different layers of Central Government, several State

Governments, Technical bodies, and Advisory bodies. Here, this vested interest will endeavor to

promote their interest by making connivance with the politicians and bureaucrats. For example,

according to the report of the World Bank (1997), the root cause of the inefficiency of the power

sector in India – now largely recognized by the policymakers – is the pervasive politicization of

most decisions affecting Electricity Boards operations and expansion, and resulting the lack of

commercial outlook in its functioning. The state, generally, has regarded its Electricity Board as

an extension of the government and has exerted the influence over its tariffs, operational,

personnel, procurement and investment decisions to further political objectives. As a

consequence, Electricity Board has been compelled to charge low tariffs to agricultural and

residential consumers, and to undertake or continue unremunerative activities on behalf of the

State Government without expecting the reward.

(5) Power sector reform drive in India

• Poor financial condition of State Electricity Boards.

• Lack of commercialization of power utilities.

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• Increase in burden of subsidy for States.

• Deterioration in quality of service and growth in power shortage.

These motivational reforms have been identified by extensive opinions of experts

as well as of key players in the industry. Reformation can be driven by the desire to improve the

economic efficiency of the enterprise. This is the standard reason cited in most literature on the

economics of electric power markets. Taking into account the hurdles to be cleared in

restructuring the power system-- and interlocking the functions of state-owned enterprises-it is

expected that efficiency alone is not the extreme factor, but sometimes, the high costs of

electricity production and the political collusion are strong factors to push up restructuring

activities. Many firms are largest users of electricity like steel plants, mining operations, and

heavy manufacturing. For them, the solution for high prices is to negotiate with the state system

to lower the prices of their inputs through central command rather than to break up the entire

system. Lower electricity prices would make it hard for electric power utilities to stay afloat in

terms of financial viability, which in turn would create a need for additional transfers of

monetary resources and other state based financing.

The reform is driven by crisis in supply. In state centered systems, where prices

are typically regulated, problems of poor supply are often reflected in blackouts and other quality

failures rather than high prices. Where power supply quantities are inadequate, a useful

barometer of political power is distinguished by considering as to who bears the brunt of

blackouts and who achieves benefits. However a breakdown in the state financing system would

trigger crises in supply and thus motivate reforms. Restructuring can also be pursued as a part of

a broad based streamlining the activities of Indian economy. Such efforts usually include

attempts by the state to exit a wide array of industries such as ports, airlines, communications

and natural resources. Thus it is always expected that electricity would be among the last

industries to be restructured as part of a comprehensive reform strategy simply because of

introduction market forces that lead electricity among the list of most complicated tasks. The

physics of electricity make it difficult to proceed with reformation on a piecemeal basis, and

often the sources of greatest dysfunction in the power system are parts like transmission and

distribution that are truly natural monopolies. Rapid technological changes, especially in wireless

communications and the ability to isolate highly competitive parts of the market from the

elements that retain characteristics of monopoly tend to create a huge opening for competition.

24

[2.4] Gujarat Electricity Board Transformation

A transformation story of GEB prominently appeared in newspaper on 13th

June, 2006 seems to have gone unnoticed. The news headlined that Gujarat Government has

successfully turned around the Gujarat Electricity Board (GEB) which was about to go sick

five years ago, enabling the latter to earn a net profit of nearly Rest 200 crore and that too,

without raising power tariffs. Specifically speaking, the Board has come across one of the

most significant transformation in recent times with the profit of Rs 200 crore in fiscal year

2005-06 replacing the whopping cumulative loss of Rs 2,542 crore in fiscal 2000-01.

Hon. Minister of State, Mr. Saurabh Patel wisely credited this transformation as the

"political will" of the Gujarat administration. The Board officials were directed to deal sternly

with cases of power theft and non-payment of bills either by individuals or by companies. He

accorded the major credit to the execution skills of administrators especially in areas of action

against violators of GEB norms. For example, State Government set up five regional special

police stations to deal with such cases and punish the violators. Interestingly, they appointed

500 retired army personnel’s to keep the power offenders in check. Thousands of theft cases

were detected and then disconnected; they were reconnected only after the violators, including

companies, paid their arrears though certain numbers of violators were convicted by the

courts. GEB, thereby, appointed managers who were accountable to settle the case. As a

result, nearly 20 lakh connections were verified and rechecked annually. the contributions of

GEB officials were truly noteworthy in this transformation. To highlight, GEB officials,

accompanied by police, wandered from villages to towns during night hours to check power

theft. While implementing the same, they also braved the irate people who attacked them at

several places and protested in all possible manners. For instance, once, an official was

kidnapped and kept in bondage until rescued by the police after several hours. Despite these,

the Board went ahead with strict measures, in accordance with the provisions of the New

Electricity Act that empowered the authorities to lodge criminal cases against power thieves.

(1) STRATEGIES FOR REFORMATIONS

The key strategies undertaken for improving the performance of erstwhile GEB are:

1. Optimization of power purchase cost

2. Overall improvement in operational efficiency

25

3. Structural reforms

4. Unbundling of GEB

5. Corporatisation of GEB

6. Reforms to reduce AT & C Losses

7. Curbing transmission and distribution losses

8. Bifurcation of feeder

9. Distribution transformer’s review

10. Increase in number of substations

11. Curbing Power theft

12. Sealing of connections

13. Provision of Metal Meter Boxes

14. Grievance redressal through effective appellate procedure

15. Optimum use of Information Technology

(2).STRUCTURAL REFORMS

1. Need for Organizational Restructuring

To start with, SEBs especially Gujarat Electricity Board strongly necessitates

the want for speedy reforms in organizational structure as well as procedural aspects of the

organization due to higher technical and commercial losses, rising power theft, growing

burden of subsidies, massive political interference, lack of competitiveness, and absence of

operational efficiency. In fact, these reforms have crystallized in Electricity Act, 2003 which

extends the logic of structural reforms and puts them in the ‘competitive oriented framework’.

Interestingly, for the outside funding agencies, structural reforms are transition phases to

usher in privatization.

2. The transformational structure

Earlier, all the activities namely transmission of power, dispatch of electricity,

bulk purchase, distribution of electricity to the end users in rural and urban areas of Gujarat

were being handled by the Gujarat Electricity Board. Now, Central Government has paved the

way for comprehensive restructuring and reorganizing of the electricity boards as per

Electricity Act, 2003. Besides, Government of Gujarat has formulated the Gujarat Electricity

Industry (Reorganization & Regulation) Act, 2003 which results into split of Gujarat

Electricity Board into four regional power generation companies, four regional distribution

companies, one transmission company and one parent company. (See Figure -1.9)

26

Figure –1.9 Structural and Functional Comparison of Erstwhile and

Changed GEB

Activities Erstwhile Existing

Generation GSECL GSECL -

GUVNL

Transmission GSECL

GETCOGETCL

Dispatch G

Bulk Purchase & Sale

E GETCO

Distribution Wires

B UGVCL

Retail Supply PGVCL

MGVCL

DGVCL

As a result, GEB has acquired corporate status and renamed as Gujarat

Urja Vikas Nigam Ltd.(GUVNL). It continues to focus on its key objectives of generation,

transmission and equitable distribution of power to achieve an all-round economic growth of the

State. For few more details, Gujarat State Electricity Corporation Limited (GSECL) was

incorporated under the Companies Act 1956 in 1993 with the motto to initiate a process of

restructuring of Power Sector and to mobilize resources from the market for adding to the

generating capacity of State and improving the quality and cost of existing generation. GSECL

envisages a wide spectrum of activities to improve the electrical infrastructure of Gujarat.

GSECL has initiated its activities in the field of generation of power. Government of Gujarat has

also given to the GSECL the status of Independent Power Producer (IPP) with approval to

undertake new power projects. The Equity Share Capital to the tune of Rs. 4440 Million is

entirely held by GUVNL. It is a unique and innovative concept visualized by Gujarat Electricity

Board with a view to corporatise the power sector and to enhance the generating capacity with

funds from financial Institutions, Banks etc. The Company made Profit of Rs. 1080 Million for

the year ended in March, 2001 Also, with the initiation of power sector reforms in the State of

27

Gujarat, The Gujarat Energy Transmission Corporation Ltd (GETCO), has been created to look

after the transmissive functions such as construction, operations and maintenances of

transmission lines and substations. In its endeavor to improve the efficiency in its operations,

Government of Gujarat has decided to bring in expertise through public participation in its

transmission business, in keeping with the trend of outsourcing the operation & maintenance of

sub-stations. Currently, the network of 10 transmission circle offices and 59 division offices is

being managed by GETCO.

Finally, Government of Gujarat has incorporated four distribution companies for

four different geographical regions of the State. For regions of north Gujarat, it has formed Uttar

Gujarat Vij Nigam Ltd (UGVNL). Likewise, it has formed Madhya Gujarat Vij Nigam

Ltd.(MGVNL), Dakshin Gujarat Vij Nigam Ltd(DGVNL) and Paschim Gujarat Vij Nigam Ltd.

(PGVNL) for conducting the functional distribution of electricity in Central Gujarat, South

Gujarat, and West Gujarat respectively.

Their objective is to undertake the electricity sub-transmission, distribution and

retail supply in the respective regions of Gujarat or outside the State. For this purpose, they are

authorized to plan, acquire, establish, run, manage, maintain, and modernize a power system

network in all its aspects. They are also empowered to carry on the business of purchasing,

selling, importing, exporting, and trading of electrical energy. It includes formulation of tariff,

billing and collection thereof. In addition, they can investigate, collect information, review

operations, plan, research, design and prepare project reports, diagnose operational difficulties

and weaknesses and advise on the remedial measures to improve and modernize existing sub-

transmission and supply lines and sub-stations.

Moreover, a state (regional) load dispatch center has been created at Jambuva

(Vadodara) as per the requirement of Electricity Act, 2003. The role of state load dispatch centre

is largely to ensure quality power supply at rated voltage and frequency. It has to deal with

economical scheduling and dispatching of power produced by - Gujarat Electricity Board,

Central Sector Power Stations and independent power projects.

28

3. PASCHIM GUJARAT VIJ COMPANY LIMITED (PGVCL) (3.1) Origin of PGVCL

Paschim Gujarat Vij Company Limited (PGVCL) is an unbundled entity of

erstwhile Gujarat Electricity Board and one of the distribution companies engaged in distribution

of electricity in the West zone area of Gujarat. Paschim Gujarat Vij Co. Ltd obtained its

Certificate of Commencement of Business on the 15thOctober, 2003. However, the company had

not commenced its commercial operations during the financial year ended 31st March, 2005. The

Company has started commercial function w.e.f. 1st April 2005.The Gujarat Electricity

Regulatory Commission (hereinafter referred to as “GERC” or “the Hon’ble Commission”), an

independent statutory body constituted under the provisions of the Electricity Regulatory

Commissions (ERC) Act, 1998, is vested with the authority of regulating the power sector in the

State inter alia including setting of tariff for electricity consumers. The Hon’ble Commission is

now deemed to be the Commission established under Sub-Section (1) of Section-3 of the Gujarat

Electricity Industries (Reorganization and Regulations) Act, 2003.

As part of power sector reforms, the erstwhile Gujarat Electricity Board (GEB) was

unbundled (1 April 2005) into seven1 companies consisting of one holding company dealing

with power purchase and other functions on behalf of all the six subsidiaries, including one

power generation company, one transmission company and four power distribution companies.

Holding Company viz., Gujarat Urja Vikas Nigam Limited (GUVNL) –deals with power

purchase and other functions on behalf of all the subsidiary companies viz., Power Generation

Company (ii) Gujarat state Electricity Corporation Limited (GSECL) Power Transmission

Company (iii) Gujarat Energy Transmission Corporation Limited (GETCO) Power

Distribution companies (iv) Uttar Gujarat Vij Company Limited (UGVCL) –in north Gujarat

(v) Dakshin Gujarat Vij Company Limited (DGVCL) –in south Gujarat (vi) Paschim Gujarat Vij

Company Limited (PGVCL) –in west Gujarat and (vii) Madhya Gujarat Vij Company Limited

(MGVCL) –in central Gujarat. All the four Distribution companies (DISCOMs) were

incorporated on 15 September 2003 under the Companies Act 1956. The DISCOMs are under

the administrative control of Energy and Petrochemicals Department of Government of Gujarat

(GoG).

(3.2) Development of PGVCL

29

Due to rapid industrial agricultural and population growth, the demand of power has rapidly

increased. therefor PGVCL should also make rapid development in the area of power demand in

this regard now we are shall discuss development of PGVCL

(1) Financial Position of PGVCL :

Financial Position of PGVCL during 2005-06 to 2009-10 has been presented in table 1.2 in terms of selected physical indices. the financial position of PGVCL for the last five years ending 2009-10 is given below.

Table 1.2

Financial Position of PGVCL (Rs. In crore)

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

A. Liabilities Paid up Capital 0.05 0.05 462.90 462.90 562.90 Share Suspense account 869.63 869.63 0 0 0 Reserve & Surplus 44.28 45.44 698.76* 702.61 705.72 Deferred Govt. grants, subsidies and consumer contribution

429.32 407.48 502.21 653.64 778.78

Borrowings : Secured 0 609.21 482.57 348.50 254.86 Unsecured 1,863.41 649.28 754.20 671.53 547.54 Current Liabilities & Provisions 709.25 1,442.05 1,796.11 2,068.98 2,577.86 Total 3,915.94 4,023.14 4,714.75 4,908.16 5,427.66 B. Assets Gross Block (includes assets not in use)

2,899.50 3,265.29 3,764.89 4,419.39 5,044.50

Less: Depreciation 533.41 673.28 832.43 1,017.95 1,241.71 Net Fixed Assets 2,366.09 2,592.01 2,932.46 3,399.44 3,802.79 Capital works –in- progress 86.13 96.50 140.21 123.56 166.62 Investment 0 0 0 0 Current Assets, Loans and Advances

1,462.48 1,333.80 1,641.67 1,384.24 1,456.10

Miscellaneous Expenditure to the extent not written off

1.24 0.83 0.41 0.92 2.15

Accumulated losses 0 0 0 0 0 Total 3,915.94 4,023.14 4,714.75 4,714.75 5,427.66 Net Worth 913.96 915.12 1,161.66 1,165.51 1,268.62

* Includes Security Premium amount of Rs. 652.23 crore

30

Source: Annual Accounts of PGVCL It may be seen from the above that the Net Worth of PGVCL increased from Rs. 913.96

crore to Rs. 1268.62 crore during the audit period. The Share Capital Suspense Account (Rs.

869.63 crore) above represents the amount transferred by the GoG to PGVCL after unbundling

(April 2005) of erstwhile GEB but pending issue of share capital. During 2007-08 the GoG

bifurcated the said amount of share capital suspense amount into equity share capital (Rs. 217.40

crore) and share premium amount (Rs. 652.23 crore) which was grouped under Reserve and

Surplus. In addition to that in the same year (2007-08) the GoG had further infused Rs. 205.45

crores as equity capital Rs. 40 crore as share application money. As a consequential impact, the

Paid-up capital and Reserves and Surplus increased from Rs. 0.05 crore (2006-07) to (2007-08)

respectively. The increase in the equity capital during 2007-08 has the corresponding impact of

increasing the net worth of the Company from Rs. 915.12 crore (2006-07) to Rs. 1,161.66 crore

(2007-08). The increase in the current liabilities and provisions (CL & P) during (2006-07).The

increase in the regrouping of security deposit of consumers to the extent of Rs. 674 crore under

CL&P which was shown under unsecured loans during 2005-06. In addition, the CL&P kept on

increasing during 2006-10 due to increase in the dues of PGVCL to GUVNL.

(2) Income Statement :

The particulars of cost of electricity vis-à-vis revenue realization per unit of PGVCL are

indicated below in the working results.

31

Table 1.3

Income Statement (Rs. In crore)

Sl No. Description 2005-06 2006-07 2007-08 2008-09 2009-10

1 Income

(i) Revenue from Sale of Power

3,361.17 3,782.25 4,951.65 5,192.75 6,285.65

(ii) Revenue subsidy & grants

472.22 466.24 403.00 394.32 397.50

(iii) Other income 179.89 453.07 172.55 142.11 157.22

(iv) Total Income 4,015.28 4,701.56 5,527.20 5,729.18 6,840.37

2 Distribution (In MUs)

(i) Total power purchased 16,985 18,413 19,189 21,167 20,883

(ii) Less: Transmission losses, if available

839 973 1186 1309 860

(iii) Net Power available for Sale

16,146 17,440 18,003 19,858 20,023

(iv) Less: sub-transmission & distribution losses

5,332 5,603 5,554 6,345 5,324

(v) Net power sold 10,841 11,837 12,449 13,513 14,699

3 Expenditure on distribution of Electricity

(a) Fixed cost

(i) Employees cost 280.75 290.16 363.46 389.93 390.29

(ii) Administrative and General expenses

82.57 57.84 68.66 75.16 80.26

(iii) Depreciation 130.89 143.34 161.51 188.58 223.92

(iv) Interest and finance charges

145.19 142.53 144.96 148.10 137.58

(v) Other expenses (Capitalised expenses)

(36.47) (42.47) (121.55) (140.89) (134.63)

(vi) Total fixed cost 602.93 591.40 617.04 660.88 697.42

(b) Variable cost

(i) Purchase of Power 3,313.47 3,996.50 4,817.48 4,882.97 5,997.50

(ii) Repairs & Maintenance

77.00 82.84 66.52 75.09 69.13

32

Sl No. Description 2005-06 2006-07 2007-08 2008-09 2009-10

(iii) Other debits (1.05) 0 11.42 77.57 81.81

(iv) Prior period expenses(net off increase

0.77 28.67 12.55 4.75 -0.13

(v) Total variable cost 3,390.19 4,108.01 4,907.97 5,040.38 6,118.31

(c) Total cost 3(a) + (b) 3,993.12 4,699.42 5,525.01 5,701.26 6,815.73

4 Realization (Rs per unit sold) (including revenue subsidy) ((1(i) + 1(ii)) / 2(v) X10)

3.55 3.59 4.30 4.13 4.55

5 Fixed cost (Rs per unit) )3(a) (vi) / 2(v) X10)

0.55 0.50 0.50 0.49 0.47

6 Variable cost (Rs per unit) (3(b) (v) /2(v) X10)

3.14 3.97 3.94 3.73 4.17

7 Total cost per unit (in Rs) (5+6)

3.69 3.97 4.44 4.22 4.64

8 Contribution (4-6) (Rs per unit)

0.41 0.12 0.36 0.40 0.39

9 Profit (+) /Loss (-) per unit (in Rs) (4-7)

-0.14 -0.38 -0.14 -0.09 -0.09

Source: Annual Accounts and information furnished by PGVCL

It may be seen from the above that while the realization per unit increased from Rs. 3.55

to Rs. 4.55 during 2005-10 (28.17 per cent), the total cost per unit also increased from Rs. 3.69 to

Rs. 4.64 (25.75 per cent) during the corresponding period. As a result, the contribution per unit

had decreased from Rs. 0.14 to Rs. 0.39 during 2005-10.

(3) Implementation of Jyoti Gram Yojana :

The GoG launched (2004-05) the Jyoti Gram Yojana (JGY) with the aim to provide

continuous power supply for agriculture and domestic use in rural areas and to reduce the

distribution losses of rural sector. Under the scheme, the power supply to rural areas is given

through installation of separate JGY feeders, for agriculture use (three phase feeders) and

33

domestic use(single phase feeders) with a view to provide uninterrupted supply for 8 to 10 hours

per day for agricultural use and 24 hours supply for domestic use. The JGY was implemented till

2007-08 in the state as a whole at a total cost of Rs. 1,290 crore by incurring expenditure on

feeders, HT/LT lines, transformers, poles, etc.

We observed that in PGVCL, though the main objective of 24 hours supply to rural areas was

achieved, no significant achievement was noticed in reduction of distribution losses in JGY

feeders. The distribution loss in JGY feeders after implementation (2008-11) was ranging from

52 to 60 per cent as against 60 to 66 per cent before implementation (2007-08) of JGY. The

reason for high losses was theft and pilferage of power, non-replacement of defective conductors

and non-replacement of conventional meters with static/quality meters.

While accepting the facts of the case, PGVCL stated (August 2010) that it had taken

corrective measures by replacing the conductors, providing quality meters, de-augmentation of

transformers etc., during 2008-10 thereby reducing the distribution losses from 66 to 52 per cent

during 2008-10. The fact, however, remains that PGVCL failed to reduce distribution losses in

JGY feeders to the norms prescribed by GERC (26 to 30 per cent).

(4) Rural Electrification :

Besides, the GoI notified the Rural Electrification Policy (REP) in August 2006. The REP

inter alia aims at providing access to electricity for all households by 2009 and minimum lifeline

consumption of one Unit per household per day as a merit good by the year 2010. The other RE

schemes viz., Accelerated Electrification of one lakh villages and one crore households,

Minimum Needs Programme were merged into RGGVY. The features of the erstwhile ‘Kutir

Jyoti Programme’ were also suitably integrated into this scheme.

In respect of PGVCL, out of 5,629 villages as on 31 March 2006, 5,613 villages were

electrified which was 99.72 per cent of total villages respectively (31 March 2010).

(5) Implementation of RGGVY Scheme:

34

In PGVCL, all the eight districts were selected for implementation of the scheme during

2005-10. During 2007-10, PGVCL had utilized Rs. 41.43 crore (58 per cent) out of the total

funds of Rs. 71.98 crore made available from REC. The stipulated date of completion of scheme

works was May 2008 in Bhavanagar district and was June 2010 in remaining seven districts viz.,

Rajkot, Porbandar, Junagadh, Jamnagar, Kutch, Amreli and Surendranagar districts. Except

Amreli district, in other seven districts the works were not completed (Septemeber 2010). The

status of completion of works in these districts is given below:

Table 1.4

Implementation of RGGVY Scheme

Implementation of RGGVY Scheme

Target Achievement % age

Nos. of Below Poverty

Line House Hold

(BPL HH)

2,19,978 1,45,670 66.22

HT Line

(Span length in KM)

600.4 292.4 48.70

LT Line (Span length in KM)

2,140.0 1,347.8 62.98

Distribution

Transformer

1,323 1,180 89.19

As could be seen from the table above ,as against the targets for covering the beneficiaries,

laying of HT lines and LT lines and installation of transformers, the achievements were 66.22

per cent,48.70 per cent,62.98 per cent and 89.19 per cent respectively. the main reasons for the

delay in execution of works were inadequate deployment of man power, non-completion of

detailed survey, delay in procurement of material by the contractor and also poor monitoring of

the project activities by PGVCL.

(6) Financial Performance:

35

The details of fund received and utilized during 2007-10 by PGVCL are summarized

below:

36

Table 1.5

Fund received and utilized by PGVCL

Year Amount

Received Fund available Funds utilized Unutilized

Balance Percentage of

unutilized balance to funds

available

PGVCL

PGVCL

PGVCL

PGVCL

PGVCL

2007-08

Funds not received

2008-09

22.57

22.57

4.03

18.54

82.14

2009-10

19.10

37.64

3.14

34.50

91.66

Source: Information furnished by PGVCL. It can be noticed the table that against an amount of Rs. 7.01 crore and Rs. 41.67 crore

received during 2007-10, Rs. 6.54 crore (93 per cent) and Rs. 7.17 crore (17 per cent) only were

utilized by PGVCL respectively. Further, in terms of the sanction, the entire works under Part-A

should be completed by PGVCL by February 2011 and June 2011 respectively. As against this,

we observed that out of 11 towns and 36 towns to be covered by PGVCL under Part-A, could not

complete the works in any of the 36 towns (Septemeber 2010).

The slow progress of works by PGVCL resulted in non-release of funds by PFC causing

consequential delays in implementation of the scheme.

(7) Consumer metering:

Attainment of 100 per cent metering was one of the prime objectives of the R-APDRP

scheme. Accordingly, the work of metering of unmetered consumers and replacement of

defective and stopped meters were required to be done under the scheme. As regards the

metering of consumers, we observed that as on 31 March 2010, PGVCL (39.27 lakh numbers)

were metered except the agricultural consumers totaling 2.60 lakh. the details of year wise target

fixed and achievement made there against is indicated below.

37

Table 1.6

Consumer metering

Year PGVCL

Target for replacement of defective/stopped

meters during the year

Actual meters replaced during the

year

Percentage of achievement against

the target 2005-06 1,34,443 1,42,317 105.86

2006-07 1,54,892 1,34,899 87.09

2007-08 NA 1,93,562 NA

2008-09 2,34,550 1,64,915 70.31

2009-10 2,34,670 2,26,362 96.46

Source: Information furnished by PGVCL.

It could be seen from the above table that the PGVCL, no target was fixed in 2007-08

however, in 2006-07, 2008-09 and 2009-10, the targets fixed were not achieved.

(8) Energy losses in PGVCL:

The energy losses of PGVCL for last five year up to 2009-10 are given below.

Table 1.7

Energy losses in PGVCL

S.No Particular 2005-06 2006-07 2007-08 2008-09 2009-10 1 Energy purchased 16,985 18,413 19,189 21,167 20,883 2 Transmission losses 839 973 1,186 1,309 860 3 Energy available for

sale 16,146 17,440 18,003 19,858 20,023

4 Energy sold 10,814 11,837 12,449 13,513 14,669

5 Energy losses (3-4)

5332 3603 5554 6345 5324

6 Percentage of energy losses (percentage) {5/3}*100

33.02 32.12 30.85 31.95 26.59

38

7 Percentage of losses allowed by GERC (percent)

34.22 32.00 30.00 28.00 26

8 Excess losses (in MUs)

-190.75 20.93 153.02 784.39 118.14

9 Average reliasation rate per unit (in Rs.)

3.55 5.39 4.30 4.13 4.55

10 Value of excess losses (in crore) (Sl. No.8 * Sl.No.9/10)

-68.78 7.51 65.80 323.95 53.75

Source: Information furnished by PGVCL. It would be seen from the above table that energy losses ranged between 26.59 and 33.02

per cent during the period 2005-10. Reduction in these losses is the most signification step

towards making the company financially self-sustaining. It could be seen from the above table

that the PGVCL suffered loss of Rs. 451.01 crore during the period 2006-10 due to excess

energy losses over the limit prescribed by GERC.

The Importance of reducing losses can be gauged from the face that a one per cent decrease in

losses could add Rs.91.10 crore to the annual profits of PGVCL respectively.

Reasons for high energy losses:

The main reasons for such high energy losses were decrease in maintenance activity of

distribution network. Excess failure of distribution transformers (DTRs). Delay in repairing the

DTRs, theft of electricity, non-replacement of conventional meters with static/quality meters,

high percentage of LT/HT ratio, etc. as discussed below:

1. Decrease in maintenance activity.

2. Failure of distribution transformers (DTRs).

3. Slow replacement of conventional meters with static/quality meters.

4. Failure in cent percent metering of Agricultural Consumers.

39

1. Decrease in maintenance activity :

In PGVCL, we observed that against the target fixed for the maintenance of HT lines, the

achievement was ranging between 42 and 69 per cent during 2005-10 whereas, in case of LT

lines and DTRs the achievement decreased from 45 to 40 per cent and 53 to 37 percent (2005-

10) respectively. However, bot DISCOMs did not take any corrective action for achieving the

targets.

We observed that the available manpower were mostly engaged in attending to the increasing

work load on account of release of new connections; complaints from consumers etc. the target

for maintenance activity could not be achieved.

2. Failure of distribution transformers (DTRs):

The details of norms fixed, actual DTRs failed and the expenditure incurred on their repairs

related to PGVCL is depicted in the below:

Table 1.8

Reformance of Distribution Transformers

Sl.

No

Particular 2005-06 2006-07 2007-08 2008-09 2009-10

1 Existing DTRs at the close

of the year

( in number)

1,13,451 1,27,226 1,48,127 1,77,135 2,07,297

2 DTR failures

( in number)

27,429 27,430 29,317 30,633 39,006

3 Norm allowed by GESC

( in percentage)

24.18 21.56 19.79 17.29 18.82

4 Norm allowed by GERC

( in percentage)

- 10 10 10 10

5 Excess failure percentage

over norms

- 11.56 9.79 7.29 8.82

40

Source : Information furnished by PGVCL.

It may be seen from the above table that PGVCL failed to achieve the target fixed by GERC

in all the four years. The excess expenditure incurred on repair of failed DTRs was to the tune of

Rs.19.34 Crore during 2007-10. In the Tariff order for the year 2006-07, GERC directed PGVCL

to bring the DTR failure rate to 10 per cent as the prevailing failure rate was very high. The high

DTR failure rates were controllable and could be minimized by carrying our timely preventive

maintenance; conversation of LT conductors into Aerial Bunch cables to reduce overloading of

DTRs and maintaining voltage of the supply.

3. Slow replacement of conventional meters with static/quality meters :

In PGVCL, from 2005-06 to 2009-10 out of 14,23,297 meters, only 8,58,829 conventional

meters were replaced. As at march 2010, 5,64,468 conventional meters (39.66 per cent) were still

to be replaced by static/quality meters. Thus, slow replacement of conventional meters with

static/quality meters led to revenue loss of 782.64 MUs worth Rs.317.39 Crore (2006-10).

PGVCL stated (August 2010) that as the static meters were of new concept during that period,

problems were faced with the quality of meters being offered by the suppliers. However, in order

to meet the demand, the conventional meters were also purchased along with the static meters.

6 Expenditure on repair of

failed DTRs

(in crore)

- - 13.21 14.43 14.36

7 Average expenditure

incurred on repair of one

transformer

(in Rs)

- - 4,505.91 4,710.60 3,681.48

8 Extra expenditure incurred

in express of GERC norms

( in Crore)

- - 6.53 6.08 6.73

41

Accordingly, replacement of conventional meters with static meters was being carried out

gradually.

4. Failure in cent percent metering of Agricultural Consumers.

GERC directed (Tariff order 2004) the DISCOMs to complete cent percent metering of all

consumers. GERC reiterated the above directives though the tariff orders issued from time to

time. Position of Agriculture Consumers (AG) viz. Metered Agriculture Consumers (MAG) and

unmetered Agriculture Consumers (UAG) of PGVCL is as under.

Table 1.9

Unmetered Agriculture Consumers (UAG) in PGVCL

Source: Information furnished by PGVCL:

It could be seen from the above table that number of UAG consumers increased from

2,58,185 in 2005-06 to 2,59,575 in 2009-10. Thus, the overall metering work of UAG consumers

was very slow.

Year Total AG Consumers MAG consumers UAG Consumers Percentage

of UAG

Consumers

to total AG

consumer

No’s Connected

Load in

HP

No’s Connected

Load in

HP

Nos. Connected

Load in

HP

2005-06 3,62,372 30,32,323 1,04,187 7,99,630 2,58,185, 22,32,693 71.21

2006-07 3,81,009 30,44,648 1,22,316 8,90,394 2,58,693 21,54,254 67.90

2007-08 4,04,861 32,63,408 1,45,298 10,60,058 2,59,563 22,03,350 64.11

2008-09 4,37,088 36,55,109 1,77,562 13,71,174 2,59,526 22,83,935 59.38

2009-10 4,57,992 39,01,990 1,98,417 15,69,279 2,49,575 23,32,711 56.68

42

(9) Revenue collection efficiency:

As revenue from sale of energy is the main source of income of prompt collection of

revenue assumes great significance. The salient features of the collection mechanism being

followed by the PGVCL are as follows:

• Consumers may make payments of the bills by cash, cheques or by demand draft.

• Revenue billed in respect of HT services is collected at collection counters located at

every circle office.

• In respect of LT services, electricity bills are generally collected by the revenue cashiers

(RC) except in some areas where collection work is entrusted to certain private circle

office.

• Both HT and LT consumers are required to pay electricity charges within 10 days from

the date of the bills, failing which the consumers are liable for payment of delayed

payment charges at the rate 1.5 per cent per month on the amount of the bill for the

period of the delay.

Table 1.10

Revenue collection efficiency

Sl.

N0

Particular 2005-06 2006-07 2007-08 2008-09 2009-10

1 Balance outstanding

at the beginning of

the year

779.89 719.53 635.78 609.80 590.71

2 Revenue assessed

/Billed during the

year

3,602,46 4,015.78 4,897.60 5,381.66 5,902.75

3 Total amount due

for realisation

( 1+2)

4,382.35 4,735.31 5,533.38 5,991.46 6,493.46

43

4 Amount realized

during the year

3,662.82 4,099.53 4,923.58 5,400.75 5,980.43

5 Amount written off

during the year

- - - - -

6 Balance out standing

at the end of the year

(3-(4+5))

719.53 635.78 609.80 590.71 513.03

7 Percentage of

amount realized to

total dues (4/3)

83.58 86.57 88.98 90.14 92.10

8 Arrears in terms of

No. of month

assessment (6/(2/12

months))

2.40 1.90 1.49 1.32 1.04

Source : Information furnished by PGVCL

We observed from the above details that during 2005-10 the balances dues outstanding at

the end of the year 2009-10 have reduced significantly as compared to the outstanding dues at

the close of 2005-06. The arrears at the end of each year in terms of numbers of month’s

assessment also showed decreasing trend, which is indicative of improvement in the revenue

collection. However the dues outstanding from permanently Disconnected consumers (PDC)

included under total outstanding for each year had increased Rs.477.30 crore (2005-06) to

Rs.493.74 Crore (2009-10) in PGVCL respectively.

(10) Subsidy support and Cross Subsidisation:

There is an urgent need for ensuring recovery of cost of service from consumers to make the

power sector sustainable. The GoG is providing subsidy with a view to ensure supply of power

to specific category of consumers at concessional rates of tariff. the table below indicates

revenue subsidy support from GoG (against concessional tariff) as a percentage of sales for the

last five years ending 31 march 2010.

44

45

Table 1.11

The amount of subsidy and sale of energy

Year PGVCL

Sales Subsidy Percentage

2005-06 3,361.17 474.22 14.10

2006-07 3,782.25 466.24 12.32

2007-08 4,951.65 403.00 8.13

2008-09 5,192.75 394.32 7.59

2009-10 6,285.66 397.50 6.32

Source: Information furnished by PGVCL

It is evident from the above that subsidy support from the Government is showing a

decreasing trend over the period 2005-2010 due to increase in the number of non-agricultural

consumers where subsidy was not given.

(11) Deficit in recovery of Cost:

The extent of tariff was lower than breakeven levels (in percent terms) of revenue from sale

of power at the present level of operation and efficiency for the period 2005-2010 for PGVCL as

show in the table below.

Table 1.12

Deficit in recovery of Cost

Year Sales

(Excluding

Subsidy)

Variable

Costs

Fixed

Costs

Contribution Deficit in

recovery

of fixed

costs

Deficits as

percentage

of sales

1 2 3 4 5=2-3 6=4 - 5 7={6/2}*100

2005-06 3361.17 3390.19 602.93 (-)29.02 631.95 18.80

2006-07 3782.25 4108.01 591.40 (-)325.76 917.16 24.25

2007-08 4951.65 4907.97 617.04 43.68 573.36 11.58

2008-09 5192.75 5040.38 660.88 152.37 508.08 8.43

46

2009-10 6285.65 6118.31 697.42 167.34 530.08 8.43

Source : Annual Accounts and Information Furnished by PGVCL

It could be seen that during 2005-10, PGVCL could not fully recover even the variable

cost during 2005-06 and 2006-07 against the revenue from sale of energy (Excluding the

subsidy). As far as fixed cost was concerned, in none of the years, PGVCL could recover it fully

against the revenue from sale of energy. It appears that the tariff is on lower side and needs to be

brought down by improving operational efficiency, viz., reduction in AT & C losses, convention

of LT lines to HT lines, metering of unmetered connections, replacement of defective meters,

improving billing and collection efficiency etc.., which have been discussed separately in the

performance audit. Moreover, efforts should also be made to reduce cross subsidization among

various sectors (Categories) of consumers.

(12) Redressal of Grievances:

The GERC specified the mode and time frame for redressal of grievances vide its

No.4 of 2004 “ Establishment of forum for redressal of grievances of consumer regulations” In

pursuance of the Electricity Act, 2003. GERC had also prescribed (Vide its Notification No.10 of

2005.) The Standard of Performance (SOP) for DISCOMs, the time limit for rendering services

to the consumers and compensation payable for not adhering to the same. The nature of services

contained in the SOP inter alia includes line breakdowns, distribution meter complaints,

installation of new meter/connections or shifting thereof etc. the overall position as regard receipt

of complaints and their clearness in PGVCL is depicted in the below.

47

Table 1.13

Redressal of Grievances

S.No. Particular 2006-07 2007-08 2008-09 2009-10

1 Total complaints received 6,24,138 6,66,455 6,82,574 5,62,202

2 Complaints redressed

within time

5,99,020 6,43,770 6,60,831 5,32,124

3 Complaints redressed

beyond time

14,873 16,094 18,392 28,239

4 Pending complaints 10,245 6,591 3,351 1,839

5 Percentage of complaints

redressed beyond time to

total complaints

2.39 2.42 2.70 5.03

6 Compensation paid, if

any, to consumers

(Rs. In Lakh)

Nil Nil Nil Nil

Source: SOP Information furnished by PGVCL.

As seen from the above table the percentage of complaint redressed beyond time to total

complaints received increased from 2.39 to 5.03 during 2006-10, which is indicative of the

ineffectiveness of the mechanism for redressal of consumer grievances.

(3.3) Organisation Structure of PGVCL:

1. Meaning and importance of organisation structure:

Organisation is a group of people working together cooperatively under authority towards

achieving goals that mutually benefit the participants and the organisation. Large number of

people is associated in achieving organisational goals. The perform a variety of functions.

Therefore there must be a defined structure for the systematic completion of work of each

specialized job so that total activities accomplish a single objective. Organisation structure is an

established pattern of relationship among components of the organisation. It prescribes

48

relationship among various position and activities. Since these positions are held by individual,

the structure is the relationship among people in the organisation.

In is a mechanism with which management directs coordinates and control the activities

of human resources. It tries to establish an effective relationship among selected employees and

in selected work place in order that a group may work together effectively. A sound organisation

structure determines inter relationship among departments, positions and employees, delegate

authority to the employees by their superiors, coordinates human activities and directs them

towards goal. The complicated task of human resources management can be simplified by

evolving an efficient system of organisational relationship, which is shown through organisation

structure.

2. Organisation structure of PGVCL

Organisation structure of paschim Gujarat vij co. ltd. is divided into three PGVCL areas,

namely administration department, technical department and finance department. Members of

these three departments- member (Administration), Member (Technical) and Member (Finance)

reports directly to the Chairmen.

2.1 Administration department:

Administration department is headed by Member (Administration) General Manager

(HRD), Secretary, Director of security and vigilance and legal adviser assist the Member

(administration), General Manager (HRD) is assisted by Additional General Manager (Personnel

and Industrial relation), Deputy General Manager (legal cases ) and Deputy General Manager

(power Stations) Secretary is assisted by Deputy secretary, Social Welfare Officer and O.S.D.

Director of security and vigilance is assisted by Senior security officer.

Human resources management is major component of the PGVCL managerial function

and it is a major sub-system in an organisation. It is the responsibility of administration

department to help executives and officers to evolve techniques or systems in operating the

organisation to achieve the goals set for it by its top management. The basic role of General

Manager (HRD) is the management of human resources. So the role of GM (HRD) is very

comprehensive. His fundamental role is of decision maker of all issues that involve human

resources management and of adviser to help the line management in making reliable personnel

49

policies. Function of GM (HRD) involves all the function from recruitment to retirement of

human resources and all related routine functions. He undertakes all those functions which are

concerned with “human element” and main objectives are to see that human resources are

purposefully utilized for the optimum achievement of the objectives of the PGVCL. His

functions are basically related with bringing about maximum individual development of the

employees of the PGVCL. motivating employees to achieve the goals of the PGVCL. realizing

their potential abilities and utilizing human resources effectively.

Human resources management is one of the most important functional areas of

management for the PGVCL. All the work performed by administration department GM (HRD)

Directly or indirectly contributes to the objectives of the PGVCL. So it can be said that

development of the PGVCL. depends upon effective functioning of GM (HRD). Sound

organisation structure especially of HRD can lead to the rapid development and smooth running

of the PGVCL.

2.2 Technical department:

Technical department is headed by Member (Technical). Executive director (T & D)

.Executive director (PPG), Executive director (Training and R&D) , director (C.S.) and Chief

engineer (LD) the member (Technical), Executive director and chief engineer (ZD) are assisted

by Chief engineer, Additional chief engineer, Superintending engineer, Executive engineer,

Deputy engineer , Junior engineer etc.

Executive director (PPG)

He undertakes the function of power generation including planning and project (P &P).

His fundamental role is of preparing planning and projects. Increasing installed capacity of

power stations to meet the power demand and maximizing utilization of installed capacity of

power stations.

For P&P , he is assisted by Chief engineer (P&P) . Additional chief engineer (generation

projects) and Additional chief engineer (engineering) Assist chief engineer (P&P). His role is of

preparing planning and projects regarding future expected demand of power and requirement of

installed capacity to meet the demand. The planning and projects are sent to the govt. for

sanctioning. For power generation, he is assisted by chief engineer /Additional chief engineer

50

(generation). He is authorized to direct power generation function at all power stations. His role

is of directing chief engineer / Additional chief engineer and portfolios of power station staff for

increasing installed capacity of power stations, maximizing utilization of installed capacity,

identifying power saving opportunities and coordinating and controlling portfolios of power

station staff.

Executive director (T&D):

He undertakes the functions of power T&D. His fundamental role is of improving T& D

system, detecting cases of power theft through installation checking squared and reducing T&D

losses. His functioning is divided into two PGVCL areas. Field organisation (Transmission) and

Field organisation (Operation and Maintenance).

Field organisation (Transmission) is headed by Chief engineer (Transmission). Executive

director (T&D) directs Chief engineer (Transmission) and Chief engineer (Transmission)

directs heads of sub-stations and transmission circles for keeping pace of sub stations and

transmission lines with increasing power generation and reducing T&D losses and also

coordinating and controlling portfolios of substation and transmission circle staff. Field

organisation (O&M) is headed by Chief engineer (Dist.)Executive director (T&D), chief

engineers (Dist.) directs Additional chief engineer of different zone offices for maintaining and

improving O & M system practices and coordinating and controlling portfolios of south zone,

north zone and west zone staff.

Executive director (Training and R & D)

He undertakes the function of training and managerial development including research

and development (R&D). He is assisted by Director of training. Executive director (Training and

R&D) and Director of training assess training needs, prepare training programmes and determine

training techniques with the help of heads of different training centers. He directs head of

different centers and training programmes. Heads of different training centers direct co-ordinate

and control trainees of different training batches. This wing of training and R&D also undertakes

various managerial development activities and R&D projects. Thus the fundamental role of

executive director (training and R&D) is of assessing training needs, designing training

51

programmes, improving skill, competence of employees, conducting managerial development

programmes and R&D activities.

All these functions of technical department are to be undertaken by human resources. So

GM (HRD) also plays very important role by providing efficient human resources to the

technical department.

2.3. Finance department:

Finance department is headed by Member (Finance). General Manager (Finance),

General Manager (Commerce) and superintending, engineer (inspection) assist the member

(Finance) General Manager (Finance) is assisted by Chief Finance Manager and Controller of

accounts. General Manager (Commerce) is assisted by Superintending engineer.

Function of G.M. (Finance) is concerned with planning and controlling of the PGVCL’s

financial resources. Function of G.M. Finance) and C.F.M. include establishing and executing

programmes for the provisions of the finance required by the PGVCL, providing information to

formulate accounting and costing policies, maintaining accounts of the PGVCL and compiling

annual statement of accounts of the PGVCL in accordance with the provision of the Electricity

(supply) Act, 1948 and the rules made there under, direction of internal auditing, inventory

control, taxes, to assist the portfolios of finance staff in these aspects etc. Functions of C.F.M.

(Budgeting and planning) are to establish, co-ordinated and administer a plan for financial needs,

to compare actual performance with operating plans and standards, to report and interpret the

result of operations of all levels of management, to supervise the preparation of reports to govt.

agencies etc. Functions of C.F.M. (internal audit) are to assure protection of the PGVCL’s assets

through internal control, internal auditing and assuring proper insurance coverage. Function of

G.M. (commerce) and portfolios of commerce staff are related with purchase of power from

different sources, revision of tariff, release of connections etc.

Working of P.G.V.C.L is divided into eight units-head office and District units namely

Rajkot, Jamnagar, Junagadh, Porbandar, Bhuj, Bhavnagar, Surendranagar and Amreli.

Organisation structure of these units is discussed below.

Organisation structure at head office:

52

working of head office is divided into nine department O & M, P&P, transmission, store

/ purchase, vigilance, commerce, accounts-inspection-audit, estt. And L.D.C., O&M, P&P and

commerce departments are headed by Executive director, transmission; store/purchase and

L.D.C.department are headed by Chief engineer and commerce, accounts and estt. Department

are headed by General Manager (Commerce/Finance/ HRD). These functional heads manage

personnel of their respective departments in running their branches efficiently. At head office,

HRD function is undertaken by GM (HRD) and he is authorized to direct the HRD function at all

other units of the PGVCL.

Organisation structure at District level:

At District level working of PGVCL is divided into eight district units Rajkot, Jamnagar,

Junagadh, Porbandar, Bhuj, Bhavnagar, Surendranagar and Amreli for effective and sound

management. Every district is under control of Chief engineer-field organisation (O & M),

Additional chief engineer, superintending engineer Division office (city, rural and industrial) is

headed by Executive engineer. Functional heads of district office, circle office and division

office are assisted by the personnel of their respective offices. At district office, HRD function is

undertaken by industrial Relation Officer/Personnel officer. At circle office, it is undertaken by

Assistant secretary/supdt. (Estt). At division office, it is undertaken by Supdt. (Estt).

At organisation can become dynamic and growth oriented only though the efforts and

competence of its human resources. Human resources are assuming increasing significance in

modern organisation. The failure to manage human resources causes immense loss to the nation,

enterprise and individual. Therefore sound human resources managements one of the

fundamental area of management. It provides direction to the management of and organisation to

meet both the objectives of an organisation and the needs of employees.