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Home News Power Sector News Power sector privatisation in Orissa

Power sector privatisation in Orissa

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While the opposition to power sector privatisation in India has focused on the Enron project and to some extent now on the Cogentrix project in Karnataka, the immensity of the Rs. 8,640-crore World Bank-sponsored privatisation exercise under way in Orissa goes virtually unnoticed.

Due to the secrecy surrounding the operations, and the relative absence of media attention, the World Bank-sponsored overhaul of Orissa's power sector has been proceeding unobtrusively and with no hindrance.

In a matter of five years, Orrisa's power sector would have been comprehensively privatised and will, if the World Bank has its way, serve as a model for other states to follow.

In a State where only part of population has access to electricity either due to non availability or non-affordability, the immediate and palpable impact of the restructuring exercise, by the Bank's own admission, is going to be a steep increase in tariff.

Already power tariff in the State has been hiked thrice in the past three years and will be increased by 15 per cent each year up to 1998. The structural improvements prescribed include elimination of cross-subsidies for agricultural and domestic consumers and raising of rates to lull-cost recovery levels. The World Bank loan is, in fact, contingent upon this increase.

Why has Orissa been chosen for this 'experiment'? The reasons have been stated unambiguously in the World Bank's Stall Appraisal Report (SAP) dated May 4, 1995, still in draft form.

"It is worth noting that it is states with the weakest SEBs in India that have shown the highest degree of willingness to seriously examine new and, in the Indian context, radical options for their power sectors, "the draft SAR states.

That the same document laments the reluctance of relatively stronger SEBs like those in Maharashtra and Andhra Pradesh to take up wholesale restructuring of their power sectors, indicates that it has been relatively easier for World Bank to push through its agenda in Orissa precisely because of the weakness of its SEB.

Successful restructuring of the Orissa power sector is proposed to be followed up with similar operations in Bihar, Haryana, Rajasthan and Uttar Pradesh where the Bank is supporting the development of a new power policy. Preliminary activities relating to evolving private power policy in these States are being financed by two Japan PHRD grants and the Technical Assistance Project for Private Power Development.

It is noteworthy that this restructuring process initiated in Orissa by the Janata Dal Government in 1993, has been fully endorsed by the new Congress (1) Government that came to power in the recent elections. This is in sharp contrast to the tatter's decision to review the Power Purchase Agreement signed by the Janata Dal Government for the Rs. 2,417-crore, 500-MW Ib Valley units III and IV with AES Transpower of the US.

It all started in January 1993 when the Orissa Government first informed the World Bank of its willingness to consider power sector reforms. This was followed by a detailed report envisaging separation of the power sector from direct government control in November 1993 outlined in a letter to the World Bank by the then Chief Minister of Orissa.
 

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