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On the occasion of the 1st Annual General Meeting of the Company, I take the opportunity to welcome the shareholders.
2. It is a matter of pride that the Accounts for the year ending March 2003 has been finalised and is coming up for adoption by the General Body. When the distribution companies were formed by the Government pursuant to the reforms process in the country, there was a great deal of anxiety and uncertainty. The biggest challenge was to establish a corporate culture with a distinct identity and to make the customers within the jurisdiction of GESCOM to be aware of the changed circumstances at the retail level.
3. That in a short span of about 18 months, the company has been able to settle down to an independent manner of working and finalizing its accounts is an achievement by itself. Further, the process of decentralization and micro level management in the distribution activity has gathered momentum is a pointer to the wisdom in creating the ESCOMs. It is in the ultimate interest of the sector that the distribution activity is performed as efficiently as possible and in a transparent and accountable manner to gain the confidence of the customers.
4. The Gulbarga Electricity Supply Company Ltd., (GESCOM), took over the distribution of power in the five districts of Gulbarga, Raichur, Bidar, Bellary and Koppal in Hyderabad-Karnataka Region with effect from 01.06.2002. During the year under consideration, it purchased 3330 Million Units of power from KPTCL and the cost of purchase amounted to Rs.715.64 crores (before subsidy of Rs.342 crores). Of this, metered and unmetered sales worked out to 2147.06 Million Units. The technical and distribution losses amounted to 1183 Million Units.
5. It is a matter of satisfaction that in the initial year of functioning itself, several initiatives have been taken to make the organisation go close to the customer. Organisational capacity for company wide planning and monitoring has been created. The company has been able to take up pilot projects on various problematic areas and come up with the necessary solutions. A beginning has been in computerisation and networking. Manpower related problems are sought to be overcome through initiatives like the Grama Vidyuth Prathinidhi Scheme and cost effective outsourcing. Though XIIMB came to train GVPs on a pilot basis, GESCOM has decided to cover all the remaining GPs through internal resources. Technical problems like transformer failures are being tackled through computerised transformer information monitoring, HVDS and other steps. Governmental programmes like electrification of Harijan Bastis, rural electrification, energisation of water supply schemes, etc., have been implemented at a faster pace. Quality of power supply has been ensured in almost all areas. Power supply has been regulated to all customers in an equitable manner. Vigilance has been stepped up considerably to check commercial losses. All out efforts are being made to reduce technical losses by addition of distribution transformers, HT/LT lines, and other technical measures.
6. Corporate Communication has been given its due importance and the rationale and compulsions of the reforms process carried to all stakeholders. HR initiatives by way training and orientation to adapt to the emerging employee skill and attitudinal requirements have been attempted in a significant measure. Continuous top management review and monitoring systems and institutionalizing of best practices are in place. What has been achieved up to now is only a beginning and much more needs to be accomplished. Professionalism in all areas of functioning is essential to reach the goal of turnaround.
7. Though social obligations are important in a utility, making a profit by providing efficient service is not a sin. It is necessary to generate internal accruals for renovation, modernization and upgradation of existing systems and capacity additions. We need to work with the objective of generating some surplus year after year to make the organisation sound and viable. This year we have a small book profit which will help us to convince lenders to support our business plans. However, the continued commercial viability of the entire sector depends greatly on the success of the ESCOMs in improving its functioning, its metering and collection level as well as reduction of technical and commercial losses. The Board of Directors have been continuously monitoring, analyzing and taking remedial measures in these areas. There are inherent constraints in the operating environment and these can be overcome over a period of time given the requisite determination, grit and steadfast professionalism.
8. KPTCL has been providing technical support in many ways. The transmission systems have been strengthened to enable the ESCOMs to get the required quantum of power at the appropriate voltage and frequency levels. KPTCL has also supported the ESCOMs in strengthening the distribution systems through the APDRP scheme by arranging technical and financial inputs from time to time.
9. The Electricity Act, 2003 has thrown up many challenges for players in the power sector. GESCOM is facing a difficult situation in as much as the consumption by the HT consumers, who though miniscule in number, contribute a significant amount in terms of revenue, is on the decline and efforts are on the woo them back to the grid, with improved service and incentive schemes.
10. GESCOM mainly caters to the consumers in the rural and backward districts of the Hyderabad-Karnataka Region. While the cost of supply of energy power works out to Rs.3.82 per unit, the returns are not commensurate with this. While the demand raised in the case of BJ/KJ and IP set consumers is of the order of Rs.1.73 and Rs.0.74 per unit respectively, realization from them is to the tune of Rs.0.11 and Rs.0.05 per unit respectively. The agricultural consumers account about 40% of the power consumption. The unmetered sales also exceed the metered sales.
11. It is necessary for GESCOM to implement the various schemes in an effective manner and realize its fruits by way of better customer satisfaction and commercial viability. While a great deal of work has been achieved in this direction, the sector imperatives demand a much higher level of accountability and performance in these areas. Metering, revenue collection and proper accounting are the bread and butter of our business. The Government will not tolerate any slackness on the part of the management and employees. The purchaser provider model for routing the subsidies imposes an onerous obligation to tighten collection standards. The regulatory frame work provides little margin for cost over runs in capital or revenue areas.
12. New and innovative methods and increase use of IT solutions are necessary to revitalize the sector. I am happy that our employees’ union has fully supported our endeavours in restructuring for higher efficiency and productivity.
13. Though the Govt. of Karnataka is committed to meet the pension liability of the KPTCL employees including those working in the GESCOM, the methodology of ensuring the financial viability of the pension scheme is ultimately through the proceeds of disinvestment of the ESCOMs and the generating companies. It is therefore absolutely vital that the ESCOMs become profitable so that there is adequate value addition that can be leveraged on disinvestment and help to build the Pension Fund.
14 The successful compilation of accounts is a statutory requirement year after year. The speed and efficiency with which this is done will support the fund raising initiatives for the various programmes and works taken up by GESCOM. The Annual Report is a significant document to facilitate the high level of performance expected of the company through timely borrowings. It would also provide a measure of comfort to all the stake holders by revealing the efficiency and economy of operations and facilitating comparison amongst the ESCOMs in Karnataka and the country.
15. We have to upgrade our financial and accounting systems, disclosures to meet the requirements of good governance. The timely conduct of meetings, finalization of accounts and submission of the same to the legislature are the important tasks to be carried out by a responsive and responsible organisation. For the year 2002-03, we have met the goal. We have to better the performance in 2003-2004 and in the coming years.
16. I wish to place on record the support and co-operation extended by the governments of India and Karnataka, the Banks and financial institutions, KPTCL, Board of Directors, the employees, suppliers, contractors and consultants in our endeavours.
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