The Hindu : ADB moots broader authority for panel

Online edition of India's National Newspaper
Monday, Dec 02, 2002

Southern States

Southern States - Kerala

ADB moots broader authority for panel

By P. Venugopal

THIRUVANANTHAPURAM DEC. 1. The reforms Bill being drafted by consultants of the Asian Development Bank (ADB) for Kerala's power sector envisages broader authority for the State Electricity Regulatory Commission.

The Commission, which has already been formed in the State, is under the provisions of the Central legislation, the Electricity Regulatory Commission Act (ERCA).

The ADB consultants, Nexant and Crisil, feel that the basic powers under the ERCA are largely confined to regulating tariff on power and that it does not support Kerala-specific policies such as ``encouraging popular participation.'' Further, they feel that the Commission created under the ERCA can easily be abolished.

The bill being drafted for Kerala, therefore, will be quite distinctive. It will mandate how the KSEB shall be unbundled into corporations and how accounting shall be done for this unbundling exercise.

It will also specify definite standards and procedures for determining tariffs, besides bringing in provisions to encourage ``broader participation in Kerala electricity industry.''

The hint is that, to ensure broader participation, better provisions than the ones included in the Central Act will be required.

The details of how the ADB consultants propose to go about the task of drafting the bill are in the report they had presented during their tripartite discussions with the Government and the KSEB the other day.

At the outset, the consultants say that much would depend on the decision of the State Government ``on some issues'' (whether to retain the profit-centre approach for power sector revamp here, or to go in for the corporatisation approach, which the consultants feel will bring better results in the State).

At the tripartite discussions, they made the presentation on legal aspects ``assuming'' that the Government would agree to the suggestion for corporatising the KSEB. If the Government decides against corporatisation, ``it would change the language of the bill, but most of its substance would be the same,'' they observed.

The consultants plan to retain in the bill the ERCA provisions governing the creation of the State Electricity Regulatory Commission. However, the bill being drafted for Kerala will have provisions to give ``broad authority over licensees'' to the Regulatory Commission.

The transition of the system from the one governed by the ERCA to the State-specific legislation will be without disturbing the Regulatory Commission, which has already been formed in the State.

The Commission created under the ERCA will be the first under the Reform Bill and its members will continue to the end of their terms.

The tariff standards to be specified in the bill will be on two principles. Firstly, the tariffs should give the licensee opportunity to recover costs, including return on investment. Secondly, the relationship between rates and costs for customer classes should be explicit and transparent.

The general approach in the bill would be ``to reduce (not eliminate) cross-subsidies over time and to fix a timeframe and quantum for the reduction.''

The bill will require that the cost of serving each class be clearly specified and the cross-subsidies be explicitly approved (by the Government).

Drafting this bill is one of the tasks the ADB has assigned to its consultants while negotiating the Rs. 3,500-crore loan for the State's power sector revamp. The bill, along with the final report on the recommendations of the consultants, is expected to be ready by the middle of next month.

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