The Hindu : Power sector reforms sluggish: study

Online edition of India's National Newspaper
Saturday, Apr 19, 2003

Southern States

Southern States - Kerala-Thiruvananthapuram

Power sector reforms sluggish: study

By P. Venugopal

THIRUVANANTHAPURAM APRIL. 18. A study commissioned by the Union Ministry of Power and the Power Finance Corporation describes Kerala's performance in the matter of implementing the reforms agenda in the power sector as `below average'.

The study was done by two rating agencies, Crisil and Icra.

The parameters which push Kerala to a low rating relate mainly to the roles expected from the State Government and the State Electricity Regulatory Commission (SERC) in the reform process. The SERC is just getting into its act in the State since its setting was unduly delayed here.

What has salvaged the State's position in the ratings to some extent is the marks it has won under the parameters relating to the KSEB's initiatives in implementing the reforms agenda.

`External factors' and `internal factors' were taken into consideration while making the evaluation. The roles of the State Government and the SERC fall under the head `external factors'. These two parameters are given 20 points each in the evaluation.

Under the head `internal factors' comes the initiatives of the power utility (KSEB) judged from three angles -- `business risk' (25 points), `financial risk and projections' (30 points) and `information risk' (five points).

The State Government's role was evaluated on the basis of subsidy payments, its outlook on tariff reforms and enabling legislation and the operational support it is extending to the power utility for improving the performance of the power sector.

Under this parameter, Kerala figures at the very bottom of the list containing 26 States subjected to the evaluation. Kerala scores just two points out of 20. Topping the list in this segment is Delhi (14.5 points), followed by Andhra Pradesh (13.5 points).

The SERC was evaluated on the basis of its tariff philosophy and efficiency of tariff order implementation while ensuring the interests of the utility as well as the consumers, investors and lenders. Kerala gets zero points under this segment (since the SERC is only beginning its work here). Andhra Pradesh tops the list with 18 points out of 20 points, followed by Rajastan (16 points). Karnataka, Haryana, Delhi and Uttar Pradesh have 15 points each for the role of their SERCs.

The `business risk' aspect of the utilities were assessed on parameters relating to power generation and transmission and distribution.

The power generation side is allotted a total of only six points, while transmission-distribution (T&D) is given 19 points. Out of a maximum of 25 points under `business risk', Kerala scores 11 points.

Under this head also, Andhra Pradesh tops the list (19 points). It is followed by Tamil Nadu (18 points) and Punjab (16 points). Under the head `business risk', Kerala is 11th among 26 States evaluated.

For evaluating the `financial risk' aspect (which is allotted a total of 30 marks) the parameters were selected in such a way as to enable a comparison of the cost-revenue positions and levels of receivables and liabilities of various State Electricity Boards/power utilities.

Under this head, Kerala receives 13.5 points and is 12th among the 26 States evaluated. Karnataka tops the list with 25 points, followed by Maharastra (22 points) and Punjab, Tamil Nadu and Rajastan (19.5 points each).

And finally, in the matter of `information risk', which covers computerisation and other enabling factors for total managerial control, Kerala is given one point out of five.

Karnataka and Haryana are the toppers under this head with 4.5 points each, followed by Andhra Pradesh, Rajastan and Punjab with four points each.

The Union Power Ministry will be undertaking this evaluation periodically so that it can closely monitor the progress made by each State in implementing the reforms agenda in the power sector. This study will be the basis for the preferential allocation of funds from the Centre's Accelerated Power Development and Reforms Programme to the States.

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