Power Report

Can Indians really expect 24x7 power supply in the near future?

The Centre has promised uninterrupted supply. But the financial health of electricity distribution companies is a big hurdle to achieving this goal.

On September 25, Union Power Minister RK Singh promised that after providing each household in India with an electricity connection by December 2018 under the Saubhagya scheme, the Centre would ensure that every home received “reliable and quality power” all day. However, if the target of providing four crore households with an electricity connection by the end of 2018 is ambitious, ensuring that power is supplied 24x7 seems like a distant hope for now.

Power cuts are not unknown in India, even in major towns and cities. On October 4, for instance, the eastern suburbs of Mumbai and large parts of Thane and Navi Mumbai saw power cuts that lasted for about three hours. This despite the fact that the state’s power production plants have the capacity to produce more power than they are currently producing.

Though the Union government has claimed that the country produces surplus power, the term actually refers to a short-term mismatch between the demand and supply of power.

Problems with power distribution

Several links in the power supply chain are not working as they should. One of them is power distribution. Power distribution companies, which purchase electricity from power producers or generators, provide the last-mile electricity connection to consumers. It is their job to buy the right volumes of power at the cheapest possible rate, and sell it to consumers. However, power distributors in India are in a precarious financial condition.

As of March 2015, distribution companies in India had accumulated losses of Rs 3.8 lakh crore and total debt of Rs 4.3 lakh crore. They were paying about 14% to 15% per year on this debt.

At the same time, these companies were running high Aggregate Technical and Commercial losses that result from meter tampering, power lost due to inefficient transmission systems and human error. In some states, these losses were as high as 30% of the total power deployed.

Loaded with huge debt on which they have to pay high interest and unable to collect their dues or raise their tariffs upwards because political considerations, many distribution companies choose to cap their losses. They do this by providing less power than consumers require. This is referred to as “load-shedding”.

The UDAY scheme

To counter these problems, the Union government in November 2015 launched the Ujwal Discom Assurance Yojana or UDAY. The scheme is intended to improve the financial health of power distribution companies by transferring their debts from their balance sheets to the states in which they operate, consequently reducing the amount these companies have to pay annually as interest on their debt.

States were asked to take over 75% of the debt of distribution companies in a phased manner – 50% in the first year and 25% in the second year. In addition, the government provided distribution companies with a variety of financial tools to ensure that they would find it easier to pay interest on their remaining debt.

In return for this debt transfer, the Union government required the distribution companies to reduce their Aggregate Technical and Commercial losses to 15% by March 2019. It also asked them to raise their rates to make sure that the companies do not sell power at a loss.

Among other things, the government proposed that distribution companies cut their losses by installing smart meters, upgrading transformers to cut transmission losses, and using cheaper domestic coal.

However, this is not the first time that efforts have been made to improve the health of power distribution companies. In 2012, the Congress-led United Progressive Alliance government approved a similar package to allow distribution companies to restructure their short-term loans. In this package, state governments took over half of the outstanding loans of state electricity boards and converted them into bonds backed by state governments. The lending banks were asked to restructure the remaining 50% of the loans and provide a three-year moratorium on principal payments to the distribution companies.

However, that plan did not quite work: distribution companies built up large debts again because their operations did not improve.

UDAY scheme disappoints

Even the UDAY scheme, which completes two years next month, has not matched up to expectations.

A status check by Scroll.in shows that since the beginning of their respective UDAY programmes, only three of the top 10 electricity-consuming states were able to cut their losses. The losses of others actually worsened.

The power ministry, however, claims that the UDAY scheme has achieved some of its objectives and it has yielded “encouraging results”.

In a press release in August, the ministry said that after interventions under UDAY, Aggregate Technical and Commercial losses in states have shown an improvement of more than 1% and the gap between Average Cost of Supply and Average Revenue Realised has reduced by Rs 0.13 a unit. It added that states show varying degrees of performance because they joined the scheme at different times.

But data shows that as many as 14 states that Scroll.in analysed had signed Memorandums of Understanding under the UDAY scheme as on July 2016. These included seven out of the 10 biggest power consumers: Andhra Pradesh, Punjab, Uttar Pradesh, Rajasthan, Karnataka, Gujarat and Haryana. Madhya Pradesh joined the scheme a month later while Maharashtra joined it in October that year. Among the states analysed by Scroll.in, Tamil Nadu was the last to join the UDAY scheme. It signed its Memorandum of Understanding regarding UDAY in January.

In July, the power minister also said that about 86% of bonds for the distribution companies’ debts, amounting to Rs 2.32 lakh crore, had already been issued under the scheme. However, this does not mean that the power sector is out of trouble.

Under UDAY, distribution companies were also supposed to solve some of the problems for power producers, which are operating much below full capacity because of the inability of distribution companies to buy power. However, if power distribution companies stay bankrupt, there is little they can do to help power producers, said Ashok Kumar Khurana, Director General, Association of Power Producers.

“The discoms [distribution companies] are literally bankrupt and some are so even after UDAY coming into the picture,” said Khurana. “Each unit of power that they buy, they incur a loss on it because of their own financials so they choose to not buy power at all, turning coal-fired plants into liabilities for companies that run them since they cannot monetise them to their full capacity.”

To cut the losses, each state signed a Memorandum of Understanding projecting tariff increases for each subsequent year post-UDAY. However, some states have not delivered on their promises. While 15 states have issued tariff orders, only eight have actually raised electricity rates, ranging from 2% in Chhattisgarh to 55% in Bihar. All tariff changes are applicable from April 1. Gujarat did not change its tariff at all.

Scroll.in analysed 11 states that had revised their electricity rates and found that only seven raised their tariffs as specified in their Memorandums of Understanding under UDAY while the remaining four failed to meet their targets. The states that overshot their targets include Bihar, Uttarakhand, Madhya Pradesh and Karnataka. Those that did not raise their tariffs enough to meet targets include Telangana and Chhattisgarh.

A questionnaire sent to the ministry of power remained unanswered at the time of publishing this story. The story will be update when the ministry responds.

We welcome your comments at letters@scroll.in.
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What hospitals can do to drive entrepreneurship and enhance patient experience

Hospitals can perform better by partnering with entrepreneurs and encouraging a culture of intrapreneurship focused on customer centricity.

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Most of these tech enabled solutions have emerged as hospitals look for better ways to enhance patient experience – one of the top criteria in evaluating hospital performance. Patient experience accounts for 25% of a hospital’s Value-Based Purchasing (VBP) score as per the US government’s Centres for Medicare and Mediaid Services (CMS) programme. As a Mckinsey report says, hospitals need to break down a patient’s journey into various aspects, clinical and non-clinical, and seek ways of improving every touch point in the journey. As hospitals also need to focus on delivering quality healthcare, they are increasingly collaborating with entrepreneurs who offer such patient centric solutions or encouraging innovative intrapreneurship within the organization.

At the Hospital Leadership Summit hosted by Abbott, some of the speakers from diverse industry backgrounds brought up the role of entrepreneurship in order to deliver on patient experience.

Getting the best from collaborations

Speakers such as Dr Naresh Trehan, Chairman and Managing Director - Medanta Hospitals, and Meena Ganesh, CEO and MD - Portea Medical, who spoke at the panel discussion on “Are we fit for the world of new consumers?”, highlighted the importance of collaborating with entrepreneurs to fill the gaps in the patient experience eco system. As Dr Trehan says, “As healthcare service providers we are too steeped in our own work. So even though we may realize there are gaps in customer experience delivery, we don’t want to get distracted from our core job, which is healthcare delivery. We would rather leave the job of filling those gaps to an outsider who can do it well.”

Meena Ganesh shares a similar view when she says that entrepreneurs offer an outsider’s fresh perspective on the existing gaps in healthcare. They are therefore better equipped to offer disruptive technology solutions that put the customer right at the center. Her own venture, Portea Medical, was born out of a need in the hitherto unaddressed area of patient experience – quality home care.

There are enough examples of hospitals that have gained significantly by partnering with or investing in such ventures. For example, the Children’s Medical Centre in Dallas actively invests in tech startups to offer better care to its patients. One such startup produces sensors smaller than a grain of sand, that can be embedded in pills to alert caregivers if a medication has been taken or not. Another app delivers care givers at customers’ door step for check-ups. Providence St Joseph’s Health, that has medical centres across the U.S., has invested in a range of startups that address different patient needs – from patient feedback and wearable monitoring devices to remote video interpretation and surgical blood loss monitoring. UNC Hospital in North Carolina uses a change management platform developed by a startup in order to improve patient experience at its Emergency and Dermatology departments. The platform essentially comes with a friendly and non-intrusive way to gather patient feedback.

When intrapreneurship can lead to patient centric innovation

Hospitals can also encourage a culture of intrapreneurship within the organization. According to Meena Ganesh, this would mean building a ‘listening organization’ because as she says, listening and being open to new ideas leads to innovation. Santosh Desai, MD& CEO - Future Brands Ltd, who was also part of the panel discussion, feels that most innovations are a result of looking at “large cultural shifts, outside the frame of narrow business”. So hospitals will need to encourage enterprising professionals in the organization to observe behavior trends as part of the ideation process. Also, as Dr Ram Narain, Executive Director, Kokilaben Dhirubhai Ambani Hospital, points out, they will need to tell the employees who have the potential to drive innovative initiatives, “Do not fail, but if you fail, we still back you.” Innovative companies such as Google actively follow this practice, allowing employees to pick projects they are passionate about and work on them to deliver fresh solutions.

Realizing the need to encourage new ideas among employees to enhance patient experience, many healthcare enterprises are instituting innovative strategies. Henry Ford System, for example, began a system of rewarding great employee ideas. One internal contest was around clinical applications for wearable technology. The incentive was particularly attractive – a cash prize of $ 10,000 to the winners. Not surprisingly, the employees came up with some very innovative ideas that included: a system to record mobility of acute care patients through wearable trackers, health reminder system for elderly patients and mobile game interface with activity trackers to encourage children towards exercising. The employees admitted later that the exercise was so interesting that they would have participated in it even without a cash prize incentive.

Another example is Penn Medicine in Philadelphia which launched an ‘innovation tournament’ across the organization as part of its efforts to improve patient care. Participants worked with professors from Wharton Business School to prepare for the ideas challenge. More than 1,750 ideas were submitted by 1,400 participants, out of which 10 were selected. The focus was on getting ideas around the front end and some of the submitted ideas included:

  • Check-out management: Exclusive waiting rooms with TV, Internet and other facilities for patients waiting to be discharged so as to reduce space congestion and make their waiting time more comfortable.
  • Space for emotional privacy: An exclusive and friendly space for individuals and families to mourn the loss of dear ones in private.
  • Online patient organizer: A web based app that helps first time patients prepare better for their appointment by providing check lists for documents, medicines, etc to be carried and giving information regarding the hospital navigation, the consulting doctor etc.
  • Help for non-English speakers: Iconography cards to help non-English speaking patients express themselves and seek help in case of emergencies or other situations.

As Arlen Meyers, MD, President and CEO of the Society of Physician Entrepreneurs, says in a report, although many good ideas come from the front line, physicians must also be encouraged to think innovatively about patient experience. An academic study also builds a strong case to encourage intrapreneurship among nurses. Given they comprise a large part of the front-line staff for healthcare delivery, nurses should also be given the freedom to create and design innovative systems for improving patient experience.

According to a Harvard Business Review article quoted in a university study, employees who have the potential to be intrapreneurs, show some marked characteristics. These include a sense of ownership, perseverance, emotional intelligence and the ability to look at the big picture along with the desire, and ideas, to improve it. But trust and support of the management is essential to bringing out and taking the ideas forward.

Creating an environment conducive to innovation is the first step to bringing about innovation-driven outcomes. These were just some of the insights on healthcare management gleaned from the Hospital Leadership Summit hosted by Abbott. In over 150 countries, Abbott, which is among the top 100 global innovator companies, is working with hospitals and healthcare professionals to improve the quality of health services.

To read more content on best practices for hospital leaders, visit Abbott’s Bringing Health to Life portal here.

This article was produced on behalf of Abbott by the Scroll.in marketing team and not by the Scroll.in editorial staff.