Getting serious about power

The Central Government has held forth enough on penalties and pulling up States for non-performance in the arena of power sector reforms. It is time for it to act. It has signed a series of agreements with the States on a package of centrally aided reforms. Electricity regulatory authorities have been set up in most States to take charge of the tariff and regulatory functions. A clear message has been sent out through the Electricity Act: State Electricity Boards (SEBs) should not be made to bear the burden of power subsidies; and State Governments that want to subsidise electricity supply to any section of consumers must necessarily reimburse the cost to the SEBs. Pro-reform States such as Tamil Nadu, Andhra Pradesh, West Bengal, and Punjab have demonstrated how to handle the sensitive issue of subsidies and the financial management of SEBs. The recent conference of State power secretaries and chiefs of the power utilities has focussed on these core issues in power sector management and reforms and identified the rough patch of technical and commercial losses in transmission. It is correct that the States and the SEBs must focus strongly on transmission and distribution losses. These aggregate 40 per cent in many States; and worse than that in a few. The Central Electricity Act provides for 100 per cent metering and billing of power supplies to all sections of consumers.

Now the Union Power Ministry and the Central Electricity Regulatory Authority need to move on to the next stage and start implementing a policy revolving round incentives and disincentives. States and SEBs that do well must be rewarded with more assistance to streamline and modernise their transmission and distribution systems; those refusing to clean up their act must be severely disincentivised. By 2007-08, the SEBs must be asked to bring down the transmission and distribution losses to below 20 per cent in the first phase and ultimately to less than 10 per cent. That itself will bring about a major change in the finances of the SEBs and enable them to turn round quickly. An ideological insistence on privatisation of these Boards will be counterproductive. Considering that some SEBs, notably those in Tamil Nadu and West Bengal, have demonstrated efficiency and results, there should be no push towards privatising them. Increasing power generation is another major issue that needs serious attention. It is not enough if the Central power utilities stepped up capacity. The States also need to show initiative: they must invest more in power projects or woo private investors intelligently. Post-Enron, private investment in power projects has taken a sharp dip. The Centre and the States must sit together and address this challenge so that serious power shortages that retard development and adversely affect the day-to-day life of the people are ended.