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Home News Power Sector News Reject the IIPA report on impact of restructuring of the State Electricity Board

Reject the IIPA report on impact of restructuring of the State Electricity Board

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The study group appointed by the Indian Institute of Public Administration to study “the impact of restructuring of the State Electricity Board” has submitted their report to the Government. The report is on the expected lines as well as meeting the guidelines of World Bank Report on ‘Indian Power sector’ in June, 2006. It supports the power policy of the government covering up the realities and the real effect of the reforms. Mr. Abraham who was the real coordinator had seen to that the report okays power policy and the restructuring of State Electricity Boards. We are reproducing below, the key findings of the study as per the report.
• Restructuring is a necessary but not a sufficient condition for turnaround of the power sector. It is important to note that restructuring is only the beginning and not the end of the process. It must be accompanied by continuous complementary efforts to enhance efficiency in the sector and improve the quality of service to consumers.
• Strong and sustained political support during all phases of restructuring is the key. Taking the employees into confidence and enlisting their willing support and strengthening the institution of Electricity Regulations are critical factors for success and sustainability of power sector reforms.
• Most of the GENCOs, TRANSCOs and some of the DISCOMs have now become financially viable. Consequently they are able to attract additional investments and better technological and managerial interventions.
• It has been noticed that most of the restructured Utilities are beaming positive trends in respect of key parameters wherever reasonable autonomy has been provided to them. The level of consumer satisfaction in these States is also significantly higher. Restructuring has brought in the required accountability in the power sector triggering improved performance. Such positive correlation needs to be further reinforced through well-designed systems and adoption of best practices on a continuing basis.
• Restructuring should not be misconstrued as privatisation. It requires demystification, aggressive education and creation of a strong constituency to preserve, promote and develop the essence of restructuring.
We after a close reading of the report found many deficiencies of which a few are given below:
The Commission does not put forward any plans to build the social dimension of its energy policy and does not address growing energy poverty, employment, social dialogue and skills.
Impact of re-structuring on social obligations subsequent to the impact on tariff are ignored and does not address growing energy poverty, employment and skills.
 Achievements of non-restructured SEBs are not compared with re-structured SEBs (Group-1 states) to reach a logical conclusion.
 Achievements of gr.1 states are enlisted under gains of restructuring while the failures are accounted under management inadequacies.
 Even though Delhi includes gr.1 states, it is not included in the detailed study.
 When key financial parameters are evaluated, the biggest state in India, i.e. UP is excluded.
 The performance rating for 2005 carried out by Icra and Crisil had also brought out a pre-determined result to support the neo-liberal policies in power sector. But they have done it with professional skill incorporating appropriate criteria for evaluation. So it was also possible for a professional to locate which are the power utilities having better financial and technical performance. That is why the ratings boomeranged MOP. Non-restructured SEBs were performing relatively better technically and financially except very few.
 Capacity addition programme of five year plans after the opening up it’s door to private capital in the sector is a big failure as evident from the gap between target and achievements. Against the expectation, the gap will be more than 50%. Instead of T&D loss, now AT&C losses are monitored and reduced. Commercial loss is consumption with out revenue. This part of loss reduction cannot offset any failure in capacity addition programme. Only reduction in T&D loss/ Technical loss can only compensate any failure in capacity additions. Also it is to be made clear that the improvement in plant performance cannot be accounted in the head of the gains of re-structuring.

The Government of India’s policy of inviting the private sector participation in fulfilling the plan targets and simultaneous reduction of government outlays has resulted in serious slippage in 8th, 9th and 10th plans to about 50 percent.
The latest economic survey has depicted a gloomy scenario in the power sector. The subsidy burden of the State has increased. The income of the power utilities are crumbling. The economic position of the State utilities is also bad. The slippage was more than 50 percent. Thus as stated above the power development is dangerously going down from the set targets.
The annual power deficiency is about 37,000 MW. Simultaneously the power rates have increased on an average more than three times.
The Maharashtra’s position is given below:
“Over the last two years, Maharashtra growing, and what now appears chronic, shortage of electric power has become a reason for considerable concern. How did a State that was power surplus descend to the position of being one of the four worst off in India? The accelerating deficit – that had crossed 5500MV recently – is bound to have a long –term impact on new investments even as Maharashtra attempts to maintain its position as the most industrialized state in India.” (Hindu dated 8.03.2007). Further a move afoot to convert Dabhol plant as Merchant Power Plant is sending shock waves to Maharashtra.

The power situation in each of the states we are not dealing with. Suffice to state that the whole power sector is in disarray.
The latest is the government’s decision to sell the shares of the National Hydro Power Corporation, Power Grid Corporation and the Rural Electrification Corporation has invited big protest of the workers against this privatization of the profit making vital industries of the power sector.
The power sector is the prime mover and an effective engine of economic growth. This being so, the pit falls in the power target and the increasing power deficiency in the country gives a real dangerous signal we are facing. Therefore we are demanding that the Power Ministry should arrange a discussion with the trade unions for finding out a way to meet the power crisis hunting the country.
We demand drastic changes in the power policy and the rejection of the report of Indian Institute of Public Administration on power sector.

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