KSEB's changing role throws up daunting problems

THIRUVANANTHAPURAM Dec. 7. The plight of the Kerala State Electricity Board (KSEB) is similar to that of a good Samaritan, accustomed only to doling out charity, suddenly being asked to sit in a pawnbroker's shop and account for every paisa he handles.

Till recently, the KSEB was functioning as an agency with the assigned duty of supporting several social and developmental initiatives of the Government. This duty ranged from taking electricity to the remotest villages to providing cheap power to light up homes and drive the wheels of the industry.

There was no compulsion for it to ensure that its account book tallied at the end of the day. When the Government asked it to supply power to the industries at subsidised rates, or provide power free of cost to the weaker sections, it did so willingly. It conceived itself as an arm of the Government, executing the Government's pro-poor, pro-development policies.

The absence of any pressure to function on commercial lines had, of course, engendered a poor work culture in the institution, with the successive Governments, political parties and their trade union wings too playing a part in the decadence.

Suddenly, the KSEB finds itself being asked to give a good account of itself. The Electricity Act, 2003, has engraved the words `efficiency, competitiveness and financial viability' across its doors. The biggest challenge before the KSEB in this age of reforms is how to get rid of the millstone of liabilities that several decades of complacency had tied around its neck.

This millstone is a combination of high cost of power purchase, high capital liability, high employee cost, high administrative expenditure, mounting collection arrears, high transmission and distribution (T&D) loss and continuing revenue gap. These problems will not vanish at the wave of a magic wand.

According to the KSEB's provisional accounts for 2002-03, against a total income of Rs. 2,707 crores during the year, the expenditure was to the tune of Rs. 3,722.5 crores, the revenue gap being Rs. 1,015.5 crores.

The revenue gap, which was zero in 1990-91, increased gradually to reach Rs. 332.4 crores in 1999-2000 and then jumped suddenly to Rs. 1,286 crores in 2000-01 and Rs. 1,316.4 crores in 2001-02. Significantly, this sharp escalation in deficit coincided with the coming of the Kayamkulam station of the National Thermal Power Corporation (NTPC).

The current year, according to KSEB's projections, is expected to finish with a revenue gap of Rs. 926.08 crores.

The accumulated capital liability (including Government loans) of the KSEB increased from Rs. 951.55 crores on April 1, 1991 to a staggering Rs. 5,094.15 crores on April 1, 2003. This entails heavy financial loss to the KSEB on debt servicing. The interest burden, which was Rs. 93.9 crores in 1990-91, went up to Rs. 672.80 crores in 2002-03.

The growth in demand for power in the State since 1990-91 is being met mainly through purchases from Central thermal power stations. The cost of power purchase shot up from just Rs. 77.6 crores in 1990-91 to Rs. 1,872.10 crores in 2002-03. Taking into consideration the operating performance for the first half of the current financial year, the KSEB's projection of cash outflow for power purchase is Rs. 1,858.13 crores this year. Power purchase is the heaviest item under the head of expenditures of the KSEB.

The employee cost, which was Rs. 670.82 crores according to provisional figures for 2002-03, is projected to go up to Rs. 693.64 crores this year. Some very tight initiatives saw the administrative expenditure going down from Rs. 466.10 crores in 2001-02 to just Rs. 141.31 crores in 2002-03 (provisional figures). During the current year, giving allowance to certain escalations expected, this is projected to be in the region of Rs. 165.88 crores.

While the Government departments owe the KSEB a sum of Rs. 449.89 crores towards electricity supplied, the arrears to be collected from private parties come to Rs. 511.85 crores, the total of the two being Rs. 961.74 crores. This item in the list of liabilities is a reflection of the soft approach the KSEB had been trained to adopt under the scheme of things here.

T&D loss of the KSEB in the recent past was in the range of 30 per cent. Two reasons cited for this high level of T&D loss are the unhealthy High-Tension:Low-Tension (HT:LT) ratio of the system here and pilferage.

The HT:LT ratio, ideally should be 1:1. However, due to the extensive electrification of the domestic sector in the State and the consequent expansion of LT lines, the ratio is now 1:6.25. The ratio can be improved only by drawing HT lines on a massive scale, which would entail big capital investments, besides a strong political will to deal with public resistance against taking the overhead lines over private lands.

"We do not mean to say that, because of these daunting problems, there is no hope of rescuing the KSEB. We have been at it for the last two years or so and matters are definitely improving, in spite of two successive years of poor monsoon that forced the KSEB to increase its dependence on costly thermal power. A high power committee, with the Vice-Chairman of the Planning Board, V. Ramachandran, as its Chairman, is drawing up a strategy to address these problems in a systematic way,'' a top KSEB official said.

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