Date:26/02/2005 URL: http://www.thehindubusinessline.com/2005/02/26/stories/2005022602490400.htm

Back Reforms needed to power SEBs

Our Bureau

"The rate of return of SEBs in 2004-05 is likely to be a negative 28 per cent."

New Delhi , Feb. 25

THE Government needs to spur reforms for ensuring greater participation of private players and discipline States to improve financial health of utilities, according to the Economic Survey.

This comes against the backdrop of a continuous rise in commercial losses of State electricity boards (SEBs), which is expected to cross Rs 22,000 crore in 2005-06.

Though transmission and distribution losses have reduced to 32.54 per cent in 2002-03 from 33.98 per cent in 2001-02, the losses continue to be "enormous," the survey said, adding improvements in distribution alone could account for over 1 per cent of fiscal correction of the GDP. Reforms in power sector have the potential of making a considerable impact on the fiscal problems of States, it said. The rate of return of SEBs in 2004-05 is likely to be a negative 28 per cent, it said, and added the resource flow arising out of such poor return was still very large. The total commercial losses of SEBs, excluding subsidies in 2004-05, are Rs 20,715 crore and likely to rise to Rs 22,013 crore in 2005-06.

Direct transfers from State governments to SEBs in 2004-05 stood at Rs 9,825 crore. Besides, there was an uncovered subsidy of Rs 17,520 crore in the current fiscal.

Once reforms in transmission and distribution segments take place, it would not be difficult to attract private players, the survey said, adding the generation segment could be a normal private industry if downstream buyers operate within a sound institutional framework.