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Should the power sector be privatised?

V. Jayanth

The view is gaining ground that all is not wrong with the public sector.

THE EXPERIENCES in the national capital and the recent unprecedented floods in Mumbai have sparked a fresh debate on whether the power sector should be privatised. The Delhi Residents Welfare Associations Joint Front and sections of the flood-affected in Mumbai have come out strongly in favour of the public sector State Electricity Boards (SEBs), They wonder why the Central and State Governments must insist on privatisation of the power utilities.

The focus of the protests by the Delhi associations has been the repeated upward revision of the power tariff and the frequent changes in the electronic meters. Their conviction is that these "ghost meters" clock more units, making them pay large bills every month. The joint front has even threatened to launch a "non-cooperation movement" against the State Government. Reliance Energy handles power distribution in Delhi.

The protests seem to have been sparked by the proposal to privatise the Delhi Jal Board — leaving both power and water supply in the hands of the private sector. Aside from the steadily rising tariff, the residents' associations are concerned about the absence of any corresponding improvement in the service. The experience with the new electronic meters appears to have swung public opinion in favour of the SEBs. The feeling is that things were much better under the Electricity Boards.

Under the new Electricity Act, the State Governments and their SEBs are bound to ensure 100 per cent metering of all power connections and to replace all existing meters with the electronic meters that are imported right now. Consumer action groups allege that there is more to it than meets the eye in this programme involving an outlay of about Rs.100,000 crore by 2020.

The recent happenings in Mumbai could be another eye-opener. There was considerable frustration among an already harried suburban population that it took ages for the private power distribution company — again Reliance Energy — to restore electricity in their areas. In contrast, the public sector Maharashtra State Electricity Board came in for fulsome praise by the residents for its swift action in restoring supply in most of the areas under its jurisdiction.

It must, however, be noted that the problem in Mumbai was serious. Transmission towers had been felled, transformers and sub-stations were either under water or completely ravaged by the incessant rain. It took some time for the private company to swing into action and restore supplies. The residents found the SEB had a much better inventory to take up urgent repairs or to replace damaged equipment. This is the advantage of the public sector but also contributes to its losses.

Need for review

At a time when there is pressure on State Governments to push ahead with power sector reforms, the experiences in New Delhi and Mumbai can provide the basis for a review of the whole approach to power sector management.

In Tamil Nadu, where the SEB has been functionally efficient and its revenue collections has been well over 90 per cent, administrators wonder whether there is any need to privatise even power distribution — not to speak of the insistence on "unbundling" or "trifurcation" of the Electricity Board into generation, transmission, and distribution companies as has been done in a few States, including Andhra Pradesh.

One thing is clear: all is not wrong with the public sector.

.It may be right to insist that the State Governments be flexible on the tariff and undertake to compensate the SEB for any direct or indirect subsidy it may be forced to offer to any section of consumers — notably farm and domestic connections. But if that is done through the State Electricity Regulatory Commission (SERC), why should the Centre insist on privatisation or unbundling?

A former Chairman of the Tamil Nadu Electricity Board says the utility has earned a name for its efficiency as well as bill collections. If only the transmission and distribution losses are contained and the subsidies are reimbursed to the Board, it can become a profitable enterprise. He wants the Central Regulatory Commission and the Union Power Ministry to set up an expert committee to look at the functioning of the SEBs and identify those that have the potential and wherewithal to turn profitable. And if they can, why should they be privatised or trifurcated?

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