Cabinet favours action plan for SEB recast

Cabinet favours action plan for SEB recast

NEW DELHI, FEB 13: Power sector reforms were discussed in detail at the cabinet meeting on Tuesday and a presentation was also made by the Union Power Minister, Suresh Prabhu on the existing power situation in the country.

According to sources, distribution of power was identified as the real problem in the power sector. It was stressed that an action plan for reforming distribution and turning around the sector has to be made by all the state governments.

Towards this, the cabinet ministers were informed that the Prime Minister, Atal Behari Vajpayee had agreed to take a meeting of all political parties and chief ministers on March 3 for generating a consensus on power sector reforms.

"Distribution is the weakest link in the structure of state electricity boards (SEBs) and is the responsibility of the states. The Centre can only encourage and assist the states in the reform process", sources said.

On the issue of reforms, it was stated that each state can take its own route for reforms and that no single blue print can be given for all states. Many states are resisting the unbundling of SEBs into separate generation, transmission and distribution companies.

On this, sources said it was pointed out in the meeting that even if some states wish to retain the SEB and try and achieve a 3 per cent rate of return with an independent regulatory commission besides 100 per cent metering, energy auditing and enforcing commercial accountability at regional distribution centres, the Centre would support the move.

The minister of power also informed his cabinet colleagues of the recent initiatives taken by his ministry for encouraging reforms at the state level. This includes negotiations with the states for signing MoUs on reforms which would commit them to a specific time-bound programme of 100 per cent metering of all consumers, energy audits and elimination of power theft.

Theft of power alone is estimated to cost the country over Rs 20,000 crore yearly and even if this revenue is saved, the power sector can show positive returns. This amount would be sufficient to wipe out the existing cumulative losses of the SEBs estimated at Rs 15,000 crore. The government would offer special incentives to states undertaking reforms. These include additional allocation of power, enhanced financing through PFC and REC besides liberal financing under Accelerated Power Development Programme (APDP).

The Orissa model, where distribution has been fully privatised, was also discussed in the meeting. The cabinet ministers were informed that revenue of distribution companies have gone up by 30 per cent in Orissa following privatisation of distribution.

It was also discussed that if some states would like to combine generation and distribution for the private sector and create companies like CESC and BSES through disinvestment and joint ventures, it would be supported by the Centre.

MoP signs MoU with Haryana:

The ministry of power and the government of Haryana signed an MoU on power sector reforms on Tuesday in the presence of the Prime Minister Atal Behari Vapayee. The MoU will affirm the joint commitment of the two sides to reform the power sector in Haryana.

The MoU which was signed between the Power Secreatry, AK Basu on behalf of the GoI and Chief Secretary, Haryana, LM Goyal, marks the beginning of the signing of many such agreements with the states. The MoU will be valid for a period of five years and will be reviewed annually. The implementation would be monitored every three months.