WB loan for SEBs undertaking reforms

By Our Special Correspondent

CHENNAI, NOV. 30. The World Bank has agreed to extend ``structural adjustment loans'' to State Electricity Boards willing to undertake reforms, while Indian financial institutions too have decided to shed their insistence on escrow accounts to extend loans to independent power projects (IPPs) in States which introduce changes to improve the viability of the EBs.

These two announcements were made, respectively, by Mr. S. S. Sharma, Special Secretary in the Union Ministry of Power, and Dr. Uddesh Kohli, CMD, Power Finance Corporation (PFC), while addressing the CEOs' Conclave today on the second day of the Energy Summit 2000, organised by the Confederation of Indian Industry-Southern Region (CII-SR). Mr. Sharma said U.P. and Gujarat would be the first beneficiaries of the World Bank's decision.

Mr. Sharma sought to counter any impression that the country was heading for a situation of power surplus or that the Central Electricity Authority's (CEA) estimate that the country would have to double the power capacity (namely, addition of one lakh MW) in the next 12 years was on the high side.

He said the ``first task'' was to avoid a situation of serious power shortage, for which huge investments were needed. This in turn required priority for reform of the transmission and distribution system of EBs to inspire confidence among investors and improve their own capacity to put up new plants. ``Unmetered power supply'' was one of the main causes behind the financial crisis facing EBs, he observed.

Denying that the Electricity Bill 2000 was aimed at eliminating EBs or imposing any particular model of reform on States, he said it only did away with the mandatory requirement for every State to have an SEB.

Mr. Sharma said it was too early to judge the success or otherwise of the reforms undertaken in Orissa, which had suffered a serious cyclone after the reform process had been set in motion. ``Initial signs'' were that the T and D losses were coming down in that State. Similarly, in Gujarat, revenue realisation was showing an upward trend.

The Special Secretary recalled the Prime Minister, Mr. Vajpayee's recent announcement of the government's readiness to think of a security mechanism for investors in the transmission sector, and asked the CEOs to come out with their suggestions in this regard. There had been very little private investment interest in transmission, he added.

Dr. U. Kohli, while explaining the decision of FIs (taken at a meeting on November 15) to link securitisation of loans of IPPs to reforms undertaken by the respective State, said FIs had realised that the escrow capacity of EBs was getting exhausted. They were ready to finance boards whose reform measures were enough to ensure adequate cash flows at the time of commissioning of independent power projects.

Citing an overall consensus among States, including West Bengal and Kerala, on the need for reforms in the power sector, even if of different models, Dr. Kohli said power ministers of States had agreed to ensure 100 per cent metering of 11 kV connections before February 2001 and other connections by end-2001.

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