Jump-starting the power sector?

INDIA'S POWER SECTOR is today in a situation that evokes more scepticism than hope. Among the several reasons that have brought the sector to such a calamitous position, the primary one is its own failure, over the years, to adhere to basic commercial principles. That the power sector in a country with severe dichotomies such as India has to cater to social inequities should not have clouded some basic facts: the importance of meeting payment obligations, even if these were between governmental organisations, and ensuring efficiency in operations, for instance. It is in this context that the decision by the Union Government - to provide an added incentive to States even while remaining firm in not giving in to their demands for a relief on the payment of current bills - should be seen as an attempt to set the tone for the more important need of reforming the power sector. Yet, these measures are to be seen as but initial steps towards the larger correctives that are required in the State Electricity Boards (SEBs). For the country to tide over its present fragile power situation, the SEBs would have to move away from their unviable operating conditions. And, unless the harder decisions on restructuring and reform follow the start made by the Ahluwalia Committee's recommendations could well turn out to be tenuous.

The grouse of the Central public sector utilities (CPSUs) that they have been short-changed by continuous defaults - the Committee estimated the total dues of the SEBs to be Rs. 41,473 crores - also requires serious consideration. In addition to the fragile nature of Union finances, the increasing realisation that CPSUs cannot continue along the track of financial dependence necessitates correctives to be put in place for the country's power sector in general and for SEBs in particular. Two issues that require to be grappled with by SEBs are the mounting transmission and distribution losses and subsidies. That unbundling of transmission from generation is, by itself, no salve for ailing SEBs is becoming apparent. It is also increasingly evident that no single model will be applicable to all States. Making SEBs viable, simply put, calls for handling operations in a commercially efficient manner; but this calls for a considerable de-politicisation of the decision-making process by the organisations, especially in financial and technical operations. While there is understandable caution among governments on the politically sensitive issue of agricultural tariffs, the solution to the transmission and distribution losses calls for a firm political resolve to begin with, and a better technical management. It would only be in the best interests of the SEBs that their failures, which have resulted in an enormous leakage of revenue from the system, are corrected.

The success of the turnabout that the SEBs are seeking will lie largely in their ability to avert a recurrence of the uncomfortable situation of having to seek waiver of dues. It is imperative that a clear message is given to the SEBs by the Union Government that such requests will not be acceded to on a regular basis. For, postponing bills is but symptomatic of deeper problems; the solutions to which are also postponed. In implementing the scheme, which has been decided upon at the highest political levels of State governments, it should also be emphasised that there should be no relaxation on what has been agreed upon and that as and when States err, they will be reined in. There is, therefore, the urgent need to mix firmness with a sensitivity to the fact that much of the issues being corrected now are consequences of callousness of the past. It is in this context that the Ahluwalia Committee's recommendation for including ``a package of incentives and disincentives linked to commercial discipline and initiation of a process of reforms'' should be implemented. Above all, bringing the Indian power sector back to life calls for a broad realisation amongst all sections of the country - not just policy-makers, but also power- users - that hard times require hard measures.

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