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Business
Reforms v performance in power: Tale of two States
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The cost of conveying power to consumers in Karnataka is more than double that in Tamil Nadu. This cost of supply is expected to go up to Rs.3.41 in Karnataka while in T.N. it is expected to come down from Rs. 3.18 to Rs. 3.07 a unit in 2003-04.
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KARNATAKA IS ranked number one in terms of economic growth for the past five years, with West Bengal being second, Tamil Nadu third and Andhra Pradesh fifth. Karnataka has signed a memorandum of understanding with the World Bank committing itself to effect reforms in governance as well as in the power sector. The Reform Act was passed in 1999 while the Electricity Regulatory Commission in Karnataka is four years old with the full complement of members, till recently. The State has natural advantages in power production with a huge low cost hydro capacity and a well run generation company, the Karnataka Power Corporation (KPCL), which has to its credit record plant load factors for its thermal plants and a good cost performance.
The State Government has extended substantial financial support to Karnataka Power Transmission Corporation (KPTCL) — the subsidy for 2001-02 alone being Rs. 2,231 crores. The State Electricity Board has been unbundled and corporatised into the transmission company KPTCL and various distribution companies.
In contrast, in Tamil Nadu, the Chairman of the State Electricity Regulatory Commission assumed charge only a year ago. The State Electricity Board continues in its old form till today. There is no power reform in a formal sense in that State; no consultants and no restructuring. The State Government gives a mere Rs.250 crores as subsidy towards power consumption in agriculture.
Yet the fact remains that the performance of the power sector in Tamil Nadu is much more impressive than in Karnataka. The poor performance of the Karnataka power sector calls into question the very thrust of the so-called reforms.
The per capita power consumption in Karnataka is 387 units as compared to 391 in A.P. and 484 in Tamil Nadu. Again, the quality of power supply in Karnataka is one of the worst in the country. In Bangalore alone, India's IT capital, which is supposed to be better than other districts, there are at least four to five interruptions every day, forcing most organisations — from a small shop in Commercial Street to industries — to go in for standby generators. This is not the case in Chennai, Mumbai or Ahmedabad, even though they too have deficits. Such supply interruptions are not a manifestation of deficits but a sign of poor management. The State utility cuts power supply during the maximum demand period in the nights, even during school and college examination time, claiming that only then they can save the maximum power! This reminds one of buses speeding past bus stops because they want to maintain punctuality.
Take another parameter, the transmission and distribution cost adder. The TNEB delivers 36 billion units of power to its consumers annually at an average generation cum purchase cost of Rs. 2.48 a unit and a transmission and distribution cost of 70 paise a unit, together making a cost of supply of Rs.3.18 a unit. The KPTCL and the Discoms deliver 29 billion units to its consumers annually at a generation cum purchase cost of Rs.1.87 and a transmission and distribution cost of Re.1.44, making a total cost of supply of Rs.3.31 a unit. One can notice that the cost of conveying power to consumers in Karnataka is more than double that in T.N. This cost of supply is expected to go up to Rs.3.41 in Karnataka while in T.N. it is expected to come down from Rs. 3.18 to Rs. 3.07 a unit in 2003-04.
On agricultural consumption, Karnataka books, that is, camouflages, its thefts more — 1,186 units per hp per year compared to 1,051 for T.N. and 895 for A.P. Viewed differently, Karnataka claims 40 per cent of its total consumption coming from agriculture, while serving 13 lakh pump sets, while the figure for T.N. is 28 per cent to serve 17.64 lakh pump sets, even under the free power regime.
One of the main reasons for this disparity in performance is that TNEB has been having a fairly good grip on both its T&D losses and has the best collection efficiency at 98 per cent. In its latest tariff filing, which is the first one, it has declared 16.25 per cent T&D loss and has promised to maintain it at this level next year too. While all SEBs including KEB had declared false figures at around 21 per cent in the pre-regulatory regime, and changed it to a much higher figure — 38 per cent in the case of KPTCL — before the regulator, it is interesting that TNEB has declared this figure even under the regulatory regime, knowing full well that excess booking to agriculture will not bring it any subsidy from Government, since the Government has clearly expressed its inability to give any subsidy. The obvious conclusion is that after all there may be a ring of truth about this figure; in which case, it is quite a reasonable performance.
Such a good performance has not come by accident. Irrespective of which party is in power, the Government almost always made a careful choice of chairman for its Electricity Board. Most of them were clean, conservative and no nonsense persons, from the IAS. The position was so important that the chairman had direct access to MGR during his regime, bypassing his Minister. Accountability at various levels of staff was clearly articulated and newspapers used to carry advertisements with the phone numbers, including the home number, of higher officials for the public to redress even minor grievances such as fuse off calls. Systems of accountability and cost consciousness have been built over time with good effect.
In Tamil Nadu, there is also a symbiotic relationship among the regulators, regulated and the Government. For instance, when the recent ERC order was passed, the regulator for the first time boldly charged an agricultural tariff of Rs. 250 per hp, which was not quite what the Government had wanted. But the Chief Minister accepted the order; even defended it and the very same day announced a scheme to pay in cash a compensatory amount to the small and marginal farmers. The Chairman of TNEB and the regulator also deal with each other in mutual cooperation. This symbiotic relationship among the Government, regulator and the utility is there even in A.P.
Contrast that with the situation in Karnataka, where the Government upstages the regulator by letting the KPTCL go to court and delays the appointment of its members, in effect making the Commission ineffective. The Chairman of KPTCL can make irreverent remarks that the Commission is wasting his and his officers' time by calling for too frequent meetings and can get away with it. Recently, the Government, at the instance of the foreign consultants, who are overanxious to give sops to non-existing investors, has been modifying the Regulatory Act in effect making the regulated body redundant. The discoms call the shots through agreements with the Government, which will be binding on the regulator and over which it will have no say. So the real reforms do not lie in paying consultants exorbitant amounts and going through motions-which for the public is no more than changing name plates-but in putting the right persons in charge of the Transco and discoms, as they have done in T.N. and are trying to do at least in the case of one discom in A.P., where the CMD is working miracles.
V. Ranganathan
(Chair Professor, Reserve Bank of India and Prof., IIM, Bangalore)
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