States agree on power reforms

By Alok Mukherjee

NEW DELHI, MARCH 3. With the Centre proposing a one-time settlement of the outstanding dues of the State Electricity Boards (SEBs) towards Central utilities, and also allowing the States to choose their method of improving distribution, most State Governments today agreed to press ahead with power sector reforms in a timebound manner. In doing this, they would focus on streamlining distribution, imposing minimum tariff on power for the agricultural sector and subsidising power supply through the budgets so that the SEBs did not incur losses.

These decisions emerged at a meeting of Chief Ministers and Power Ministers convened by the Prime Minister, Mr. A.B. Vajpayee, which was also attended by the Union Power Minister, Mr. Suresh Prabhu, the Union Finance Minister, Mr. Yashwant Sinha, and the Deputy Chairperson of the Planning Commission, Mr K.C. Pant. To work out a scheme for the one-time settlement of the outstandings - about Rs. 26,000 crores - an expert group is to be set up. It will present a report within three weeks.

A high-level group has been formed, with the Union Power Minister and some Chief Ministers as members, to monitor the process. On the basis of a memorandum of understanding between the States and the Centre, allocation of Central funds would be made, subject to attaining the milestones listed in the MoU.

The agenda for the meeting was set by the Prime Minister who drew a dismal picture of the power sector. ``In view of our rapidly growing needs, we need to add 100,000 MWs to our generating capacity in the next 10 years... This will cost Rs. 800,000 crores including associated costs in transmission and distribution systems. Nearly half of these resources have to come from the private sector.''

The Prime Minister frankly admitted that attempts to reform the power sector had not moved smoothly. ``Several projects promoted by the private sector have failed to take off, though an enabling policy framework has been in place for the past eight years. Till date, independent power producers have added only 5,000 MW of capacity and only another 5,000 MW of capacity is under construction. Many viable projects have not been able to achieve financial closure due to inability of the State power utilities to have an adequate payment security mechanism.''

Mr. Vajpayee pointed to the tendency of providing free power to certain segments of the consumers. ``Only 40 per cent of the power supply is billed. And not all those billed are made to pay. There are also many other categories of users who get electricity either free or at highly subsidised rates in the name of agriculture. The combined effect of all this is the stupendous losses of our SEBs, which now stand at an unsustainable level of Rs. 24,000 crores each year. These losses have further worsened the fiscal health of many State Governments.''

All-party meet proposed

Prior to the meeting, the Congress Chief Ministers of Madhya Pradesh, Maharashtra, Rajasthan, Delhi and Karnataka, met this morning and decided that the Congress would speak in one voice which would be articulated by Mr. Digvijay Singh of Madhya Pradesh. Consequently, Mr. Singh, on behalf of the other Chief Ministers, proposed that power sector reforms should be depoliticised; and for this, the Prime Minister was requested to convene an all-party meeting where not only Chief Ministers but the leaders of Opposition in State Assemblies should also be invited. The proposal was accepted by the conference.

The matter of imposing a minimum tariff of 50 paisa per unit for power supplied to the agriculture sector - a decision of the 1992 Chief Ministers' conference and pending since - saw some political opposition, mainly from Tamil Nadu and Punjab. First, it was pointed out that with the setting up of regulatory commissions at the level of the States it was the discretion of the Government of the day to subsidise any segment of the consumers. Only, the cost of the power supplied to them would have to be made good from the State Budget so that the generating unit did not suffer losses.

Secondly, it was said that mere metering of power supply would not suffice and some recovery of cost - even a nominal 50 paisa per unit - should be done so that the system remained effective. If no attempts were made to monitor the meters, there could be a tendency of ``meterised theft'', as Mr. Suresh Prabhu put it.

On the issue of streamlining the distribution system, the Centre told the State Governments that they not necessarily have to go in for privatisation of the distribution system.

Send this article to Friends by E-Mail

Section  : Front Page
Next     : Taliban destroys most of Buddhist relics