Category: Restructuring of SEBs

Stymied by populism

ELECTRICITY REFORMS : One major reform that has been sacrificed at the altar of populism is the provision for ‘open access’ under the amended Electricity Act (2003). Under the Narendra Modi dispensation, even as reforms are progressing on several fronts, ironically, electricity is one area where implementation is hamstrung by political establishments in majority of the states, including the BJP-ruled ones. The reason being they are embracing populism in the form of supply to certain segments such as farmers, poor households at low tariff, or even free, and letting thefts happen. One major reform that has been sacrificed at the altar of populism is the provision for ‘open access’ under the amended Electricity Act (2003). Under this policy, which was...
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Electricity reforms – ‘open access’ stymied by populism

An over-arching component of prime minister Modi’s good governance mantra is effective implementation of the laws and policies & programs of the government. He has amply demonstrated this in several areas viz., DBT [direct benefit transfer] of LPG subsidy, Jan Dhan Yojna [JDY], MGNREGA etc with substantially positive outcomes. However, electricity reforms is one area where proper execution is hamstrung primarily due to non-cooperation from states. At the core of reforms initiated by present dispensation in the power sector is improvement in the functioning of state electricity boards [SEBs], greater regulatory oversight over SEBs and power generators besides creating conditions for enhanced competition in the sector so that consumers get the benefit in terms of lower tariff and better quality...
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UDAY – no panacea for SEBs woes

One of the major accomplishments of Modi – government during its two years stint has been in alleviating the constraints facing power generation companies/entities. It has done so by increasing production of coal by Coal India Limited [CIL] and filling all voids in the evacuation, transportation and distribution infrastructure to reach supplies to generating stations. It has also helped gas based power plants by arranging supplies of gas at lower rates enabled by pooling of imported LNG [liquefied natural gas] with cheaper domestic gas. The cost of LNG itself has been brought down drastically by re-working an existing long-term 25 year contract with RasGas [Qatar] to align the formula with its low current international price [courtesy, low crude price]. It...
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Power consumers – relief stalled by court

In the race to provide power at affordable rates, Modi – government has taken several initiatives. These include increase in supply of cheaper domestic coal, rationalization in coal linkages [giving more to energy efficient generation plants], strengthening of transmission and distribution [T&D] systems, financial restructuring to reduce interest burden, enabling gas based power plants to access gas at cheaper rates [via pooling of imported LNG with domestic gas], incentive to states for reducing theft etc. However, there is one area where there is unprecedented scope for reducing cost of power supply and yet, it has not got the desired attention and even where the ruling establishment takes considerable interest and wants to act with alacrity, the efforts are frustrated by...
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SOME CARROTS BUT NO STICK

Modi’s new bailout package for State Electricity Boards is fine. However, he will need to force compliance In 2012, the UPA Government had granted a financial restructuring package of Rs2,00,000 crore, to deal with the debt of ailing State Electricity Boards. As part of the package, 50 per cent of the SEBs outstanding liabilities were taken over by the respective State Governments and the balance was issued to public sector banks at nine per cent interest. In return, the States were to increase tariff and reduce transmission and distribution losses to ensure that the realisation from sale of electricity equals the cost of procurement in two to three years. The objective was to eliminate losses and make SEBs stand up...
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SEB reform – catch the bull by horn

In 2012, the erstwhile UPA – government had granted a financial restructuring package [FRP] to deal with a mammoth Rs 200,000 crores debt of ailing state electricity boards [SEBs]. Under it, 50% of the outstanding liabilities were taken over by respective state governments and for balance 50% bonds were issued to public sector banks [PSBs] carrying an interest as low as 9%. The FRP was conditional on states taking requisite steps to increase tariff in a calibrated manner and reduce transmission and distribution [T&D] losses in order to improve realization from sale of electricity so that it converges to its cost of procurement. The overarching objective was to eliminate losses in 2-3 years and thus ensure that they are no...
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Cut theft and freebies to stem power losses

The Centre must deduct the discoms’ losses from the devolution of taxes to the erring states On September 12, 2015, the chief secretaries of states whose state electricity boards (SEBs)—that carry out power distribution—met Union power minister Piyush Goyal with a demand for a fresh bailout package to deal with the SEBs’ accumulated debt of over R3 lakh crore. Goyal took a bold stand by turning down the request. SEBs have already got two bailout packages—R40,000 crore in 2002 and around R2 lakh in 2012. These were given on the promise that SEBs will adjust tariff to plug gaps between revenue and the cost of electricity, besides reducing transmission and distribution (T&D) losses. But, they have failed on both fronts and...
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Stemming rot in power sector – Kejriwal shows way

During his first shot as Chief Minister, Delhi, Arvind Kejriwal had promised 50% cut in power tariff. He did so primarily on his conviction that the power distribution companies [PDCs] had indulged in financial irregularities leading to inflated cost of procurement and distribution. These were approved by  DERC [Delhi Electricity Regulatory Commission] acting under diktat of  then political dispensation [a clear indication of how regulator was forced to play to his masters tune can be gauged from the fact that the then chairman who had approved 23% reduction in tariff in 2010 was removed and his successor affected hike of 22% in 2011 and a further 32% in 2012]. Kejriwal’s plan was to nail these irregularities and recover excess sums...
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State electricity boards – ‘Achilles heel’ of India’s power landscape

A major ingredient of Modi – government’s development agenda is un-interrupted supply of power 24×7 to industries, services, agriculture, households et al in required quantity at affordable price. It plans to reach this goal in less than a decade. Undoubtedly, it is making unstinted efforts in all vital areas viz., adding to the generation capacity [a big chunk in solar power to make our systems environmentally benign]; making arrangements for fuel supply especially coal and gas to run power plants at optimum load; augmenting and strengthening the transmission and distribution (T&D) infrastructure [by involving private sector through a competitive bidding process] and providing last mile connectivity through a well-spread out network of feeder lines etc. However, one area of concern...
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Stop cult of power freebies

Inaugurating the first Renewable Energy Global Investors Meet (RE-Invest), prime minister Modi castigated political parties for promising to supply power at reduced rates saying how could they make such promises when the concerned states are dependent on electricity supply from outside. The remark was targeted at Aam Aadmi Party (AAP) which in its election manifesto, had promised to cut electricity bills by half even as Delhi meets nearly 70% of its power requirements from other states. In 2015-16, its total requirement is expected to be over 6000 MW; so it will draw 4200 MW from other states. However, it would be imprudent to dismiss this as a political statement directed at AAP alone. Cutting across party lines, Modi was making...
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