The Hindu : Power board to be trifurcated

Online edition of India's National Newspaper
Sunday, Nov 17, 2002

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Power board to be trifurcated

By Mahesh Vijapurkar

MUMBAI Nov. 16. The Maharashtra Government's decision to trifurcate its Electricity Board for generation, transmission and distribution in three months as a prelude to privatisation has triggered a debate as to whether the objective should be profit for the Government by its sale or the protection of consumer interests.

Pune and Navi Mumbai would be the cities where the privatisation of power distribution would be first tested and as logistical glitches are sorted out, the practice would spread to other areas.

The Maharashtra Government's stated interest now is to protect its own commercial interest according to officials, but the consumers would also want their interests to be taken care of.

The plans to "unbundle" the board by January, February is a big step for the Government which had, despite its commitment earlier, dithered and at one point, Ministers told the World Bank that "clear soft loans now and tomorrow morning, we would start unbundling the MSEB.''

Maharashtra's efforts at privatisation have been slow and patchy so far. It has committed to wind up or sell off its perennial loss-making PSUs, set up a quasi-judicial board to work out the deals with a proviso that its recommendations are binding on the Government. Though it had recommended winding up of one, the follow-up action has not come through yet in months.

Of the 60 PSUs, only 12 are listed for reference to the Board for Restructuring State Enterprises and just six have been sent to it, raising doubts about the Government's willingness. Apparently, it does not want to risk its political fortunes by letting jobs vanish. Curiously, one referred to the Board is the statutory Pollution Control Board that cannot be disbanded or sold off. Some are those mandated to fund disadvantaged people and regions.

Short on cash, downgraded consistently by rating agencies, its guarantees being invoked by lenders for debts gone bad, the losses on account of PSUs alone have grown from Rs. 54 crores in 1985-86 to Rs. 1,140 crores in 1997-98, the Government's involvement being Rs. 19,186 crores. Seventeen of the 67 PSUs are "non-working'' and 43 are loss-making as of March 2000. Few audit their results regularly and despite cursory legislative scrutiny, most have negative worth.

Privatisation has not been easy so far. For instance, a newly set up civic corporation covering three towns — Sangli, Kupwad and Miraj — wanted to privatise its water supply but citizens who fear higher bills are opposing it. This may recur when the MSEB, post-unbundling, is privatised. The Ulhasnagar Municipal Corporation, weighed down by unpaid bills totalling Rs. 100 crores for water supplied by the State Government for re-distribution, is planning to privatise it.

Some small patches of privatised roads across Maharashtra have done well but privatised collection of octroi was given up after an initial start in Kolhapur's civic body because of violence becoming a feature of the collection arrangement.

Other civic bodies, though dependent on increasing octroi to meet its commitments on civic services, are loath to follow the same route for the same reasons.

Elsewhere, funds have been raised through bonds to build roads, dams, flyovers and an expressway though the yields through toll have not matched the debt servicing costs and yet, the Government has moved to privatise irrigation projects on build-operate-transfer concept. But it is not hopeful of a "big impact.'' Says the Chief Minister, Vilasrao Deshmukh: "It is not as though people would flock to invest here.''

Its first off-loading of equity in a Government company years ago has done well when it moved out of SICOM, a development finance institution in which it now holds only 51 per cent — down from 100 per cent — and wants to shed another 25 per cent to enable it to tie-up with a bank to turn into a financial institution with muscle.

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Power board to be trifurcated