The journey of ERP Implementation in ‘Transmission line’ business in Power sector in Orissa
Power Sector Reforms in India
Power sector in India is vast but automation is limited. It needs to grow at a very fast rate close to 10% to keep up with the demand. Also there is the additional overhead of power theft which cause losses worth crores. The performance of the power sector is directly proportional to the overall economy of the State. The quality and cost of power is an important factor for industries to be competitive, and for the welfare of all citizens of the State. Hence Power sector is an important constituent of infrastructure. Power Reforms are a crucial item in Government of India’s agenda for growth.
The power sector consists of generation, transmission and distribution utilities and is a crucial component in India’s infrastructure.
Problems faced in Power Sector
- Transmission and distribution losses are around 27 per cent. Collection losses amount to 7% approx.
- Several state electricity boards follow medieval accounting systems, which hamper estimation
- Fuel Shortage
- Transparency is missing for various operational costs
- Power sector has age old systems for Meter reading
- Difficulty in obtaining environment approvals and Land Clearances
What is Government’s Contribution?
There is an independent regulator in the Central Electricity Regulatory Commission. There is also the carrot-and-stick Accelerated Power Development and Reform Program, which encourages states to clean up their act.
Recent revisions to APDRP could streamline the process and make it more effective.
Government of India is pumping lot of money in the Power sector and on the other hand there is also an equal focus to reap benefits by cost savings
It has instructed all states for automation and IT enabled development
Where will the Savings come from in the Power sector?
- Lower losses/theft
- Increased sales possible
- Lower operational costs
- Load management
- Better consumer experience (and hence, possibility for higher tariffs)
- Future interaction with smart appliance and smart home networks
- Automation in Metering and Billing
A New World for Power Systems
- Includes “smarts” for significant improvements in efficiency
- New services can be enabled once the appropriate infrastructure is in place
- Modular innovation, e.g., home automation and appliances
- Developing countries (esp. Asia) can lead the way through leap-frogging
State Reforms – Orissa
- Orissa – The Front Runner (1996 Reform Act)
- Unbundled and then privatized distribution
- Strong World Bank influence (design and finance)
- Considered a failure – Consumers and utilities have both suffered
- Losses (kWh and economic) both increased
Many causes of failure
- Unrealistic assumptions and goals
- Paying Customers
- Lack of government support
- Dampened enthusiasm for reforms, especially privatization
- Cyclone prone State
What are OPTCL and other bodies in Orissa?
Orissa Power transmission is called the ‘Lifeline of Orissa’ and is responsible for transmission of power across the state of Orissa.
It is a State owned electricity Transmission Company in one of the eastern states in India, transmitting more than 3500 MW of power over 160,000 sq. km of area. It is a sister company responsible for power trading. Also there are 5 different Trusts associated with retirement benefits for employees.
Gridco is the body for generation of power while other bodies called as DESCOMs like CESU, NESCO, WESCO, SOUTHCO are present for distributing power.
OERC (Orissa electricity Regulatory Commission) is the governing body and controls various financial operations and fixes the tariff for distribution.
Functions of OPTCL
- Transmission of electricity through EHT Intra-State transmission system
- Undertaking expansion and upgradation of EHT Lines and sub-stations to reduce transmission losses to a minimum or the loss allowed by OERC
- Discharges all functions of planning and coordination relating to intra-state transmission system with NTPC and other generating companies supplying power
- Supplies emergency power to industries located elsewhere, inside the state
- Availing start up power to IPPs (individual Power plants) and other generating stations in the state of Orissa
- Conveyance of power incidental to Inter-State transmission. Transmission of power for both long term and short term open access customers as per OERC (Orissa Electricity Regulations Corporation) regulations, 2005.
- Ensures development of an efficient, coordinated and economical system of Intra-State transmission lines for smooth flow of electricity from generating stations to the load centers
What was the need for ERP in OPTCL?
- There was a pressing need to streamline various business processes across all departments like
- Sale of Scrap Sales
- Inter Organization transfer of goods between 2 divisions
- Optimize Inventory Levels in Stores
- Timely payment to Contractors so that Project work is not hampered
- There was unnecessary paper and hard-copy records storage costs as all processes were manual and many were outdated which resulted in data entry redundancies and unnecessary use of employee resources.
- There was also a need for increasing power generation in near future
- Accounting and Financial consolidation was taking longer and employees were spending hours to enter manual journals with reconciling of data getting even more time consuming and difficult
- Incomplete, often inaccurate picture of overall company performance for the senior management, so accurate reporting and automating operations became the need of the hour.
Design goals for a new IT-enabled System
Implement a basic infrastructure to…
- Micro-measure every unit of power across the network
- Allow real-time information and operating control
- Devise mechanisms to control the misuse and theft of power through soft control
- Implement ERP
- Reduce losses
- Improve power quality
- Allow load management
- Allow system-level optimization for reduced costs
- Increase consumer utility, satisfaction, and willingness to pay
The assignment was not only an ERP implementation but was a humongous effort of introducing ERP with its best practices and making OPTCL adapt to business process changes
Challenges faced by Implementation Team
- Age Old Business Processes
While trying to understand the systems and processes, the implementation team found out that it was a primitive world in OPTCL where most of the business processes were done manually.
- Lack of IT knowledge and usage of IT in day to day operations
Most of the people in OPTCL had very limited knowledge of IT services and thus making them understand ERP and its benefits was quite difficult. The implementation team had to start from scratch with numerous product workshops making them understand “What ERP is all about”. It was like starting with A B C of ERP.
- Ageing Workforce
Most of the employees/users were in their 40s and there was a huge resistance to change the way they were doing business operations
- Lack of Standardization in Business Processes
The business processes that were followed by each department was not standardized and each one tried to highlight their supremacy over others
- Endless business meeting and discussions without substantial outcome
Many a times conclusion to standardize business process would never be conclusive as business teams from different departments would engage in cross talks and not follow meeting agenda. Hence most of the meetings were repetitive and directionless.
How all the above challenges were mitigated?
- A strong Change Management solution that fits the India psyche.
- Very Efficient design that provides industry best practice solutions.
- A very strong program management, public relations skills.
How Oracle Applications helped the state owned transmission company transform its business
- Payroll has been automated in all the offices
- Better and regulated Inventory management
- Human Resource Department has discarded paper based Performance appraisal system for online appraisal system
- Easy and faster disbursement of Funds by Head office payment section to Suppliers and Contractors thus improving relationship with suppliers
- Standardization of practice for Bill processing, payment and accounting
- Better Project planning and progress reporting thus improving project monitoring construction work.
What were the benefits of Implementing ERP and Meter Data management solution
- Information and Internet access
- Improved and real time monitoring and control
- Greater Visibility and transparency towards costs
- Theft and tamper detection
- Automated Meter data management resulting in increase in revenue
- Improved forecasting and estimations
- Check unnecessary spending by keeping track of inventory levels, payments to suppliers and others.
- Integrated processes and systems
- Remove manual processes and implement Paperless transactions
Sandeep Chatterjee is an Associate Director with the Advisory practice at KPMG. Sandeep has an experience of 15 years in Supply Chain Management, Human Resources, Emerging Countries enablement, Business Process Reengineering, ERP Implementation, Corporate Strategy, Sustenance, Supply Chain Network Optimization, ERP Footprint Review.
Jayeeta Pal is a Lead Consultant with Infosys Technologies Limited. She has 14 years of experience in Supply Chain Management, Project Management, Business Process Reengineering and ERP Implementation. Her expertise lies in Power Sector reforms in India and she has led engagements with State Electricity Boards in driving initiatives related to waste management.