The Hindu : `ADB loan will harm power sector'

Online edition of India's National Newspaper
Thursday, Nov 28, 2002

Southern States

Southern States - Kerala

`ADB loan will harm power sector'

By Our Special Correspondent

THIRUVANANTHAPURAM Nov. 27. The corporatisation theory being mooted by the Asian Development Bank (ADB) for KSEB revamp is a clever way of ushering in privatisation in the power sector, according to the KSEB Officers' Association.

In a statement here today, the association general secretary, K.R. Unnithan, said the Electricity Minister's recent statements too displayed the Government's willingness to tow the ADB line.

The ADB's plan, briefly, was to transform the power supply service in the State into a highly profitable commercial activity by stopping all the subsidy operations. The first step was to have the KSEB unbundled and the unbundled entities turned into separate companies. These companies would then be privatised and, gradually, the sector would be freed of the controls of the Regulatory Commission too. Ultimately, electricity supply would be totally at the mercy of the market forces, he said.

Mr. Unnithan said that, from what could be gathered from media reports on the tripartite meeting between the ADB consultants, KSEB and the State Government at Kovalam last week, even a Reform Bill envisaging all these changes was being drafted by the ADB consultants for the benefit of the State Government.

``This does not auger well for the democratic system we have here. The Government is surrendering the autonomy of the people by entrusting to the ADB the powers to take decisions and even draft laws,'' Mr. Unnithan said.

He said the ADB-initiated reforms would serve only to make Kerala a victim of the same kind of difficulties experienced in some of the other Indian States which had tried similar reforms in the power sector. There were lessons to be drawn from several other countries also, where such reforms had led to steep increases in the power tariff and artificial shortages in electricity supply.

He said the State Government, for the sake of a Rs. 3,000-crore loan, was mortgaging the hard-earned right of the citizens to be the masters of their own destiny. The interest on this loan was to be returned in dollars. The effective interest rate, therefore, would be very high since the rupee-dollar exchange rate was constantly changing to the disadvantage of the rupee.

The interest rates in India had fallen substantially in the recent times, with the prime lending rate now ruling at six per cent. To take advantage of this situation, even foreign companies were opting for Indian loans nowadays. The ADB loan would carry an interest of 13 per cent and would have to be repaid in dollars.

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