The Hindu : Govt. subsidy for power tariff `worrisome'

Online edition of India's National Newspaper
Sunday, May 05, 2002

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National

Govt. subsidy for power tariff `worrisome'

By Our Special Correspondent

MUMBAI MAY 4. Unless the State Electricity Regulatory Commissions (ERCs) across the country use their penal powers and take ``strong positions and refused to entertain SEB and licensees' submissions for tariff revisions till their reasonable directives are complied with,'' the viability of the power utilities and the credibility of the regulators would ``be at stake,'' according to Dr. Madhav Godbole, who presided over the official review of the Enron project.

``The jury is still out,'' and is yet to pronounce if the ERCs ``have fulfilled adequately the responsibilities entrusted to them,'' he said while providing the first holistic analysis in the public domain on a host of issues relating to the power sectors, including the role of the ERCs and the extent to which privatisation has delivered benefits to the consumers. Dr. Godbole was delivering the D. T. Lakdawala Memorial Lecture on Saturday.

The power sector was riddled with problems of losses and inefficiency and the estimated losses of the SEBs in 2000-01 was Rs. 26,013 crores. Commercial losses, with massive subsidy inputs, was lower at Rs. 20,220 crores and even the net internal resources was negative at Rs. (-) 13,902 crores and even the three per cent minimum rate of return was possible only with the help of subsidies.

``Mere privatisation does not seem to be an answer to the problems either.'' Orissa, which privatised the sector first, has shown up a result ``which was distressing and disheartening'' as the privatised distribution companies there were no better than any SEB. Citing the Kanungo panel report, Dr. Godbole said that ``private promoters of the distribution companies neither brought superior management nor arrange financial support by way of even working capital''.

The unpaid bills for bulk purchase by four distribution companies were as high as Rs. 1,083 crores and the advise by the consultants engaged at great cost — Rs. 306 crores — could not be assimilated.

Unless ``improvement in performance was clearly visible and perceived by the public, they would not be convinced about the much-publicised benefits of the reforms process.''

Apparently, the concept of not just free lunches but ``also a free breakfast'' seems to ride the consciousness of the administrators who continued to provide subsidies to the power sector and even government organisations indulged in theft of power. Dr. Godbole cited reports of some ERCs saying how police stations illegally tapped power from the lines going past the premises.

The ERCs have not made any ``perceptible difference to rationalisation of tariffs'' and it was a ``distant and elusive goal'' yet. The State Governments were subsidising tariffs fixed by the ERCs for the very categories which had enjoyed subsidies in the past though these steps go ``against the very purpose underlying'' the legislation creating the regulatory mechanisms.

Transmission and distribution losses continue to be ``an overwhelming problem'' — ``the biggest disappointment''. Government interference in the sector, especially by virtue of subsidising the tariff, worries Dr. Godbole who asked ``if the SEBs should have the freedom to approach the ERCs for tariff determination without any interference by the State Governments''.As is known, after the tariffs are announced, the Government tends to step in with subsidy plans for populist purpose.

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