Hike power farm tariff to revive SEBs, PM to states

Hike power farm tariff to revive SEBs, PM to states
Press Trust of India

New Delhi, Mar 3: Centre today proposed a one-time settlemt of Rs 26,000 crore outstandings of state electricity boards (SEBs) to psus if states undertook to carry power sector reforms even as Prime Minister Atal Bihari Vajpayee asked chief ministers to increase electricity tariff for farm sector to improve sebs financial health.

Chief ministers who attended the conference on `reforms in power sector' agreed to setting up of an `expert group' headed by Union Power Minister Suresh Prabhu to recommend in three weeks the ways for one-time settlement of clearing the arrear backlog while committing themselves to reforms in a time bound manner.

Briefing reporters after the conference, inaugurated by Vajpayee, Power Minister said "all chief ministers unanimously resolved to achieve the break-even stage of their sebs within two years as part of power sector reforms."

Following up the proposal of Finance Minister Yashwant Sinha for a `one-time settlement' of buregeoning payment problem for which centre was willing to provide all help, the CMs decided that expert group would recommend the details of the bonds to be issued by states for CPSUs including the maturity period and interest rate.

Vajpayee warned of dangers of acute financial crisis on account of free and subsidised power being doled out to many sectors and asked chief ministers to raise electricity tariff for farm sector to 50 per cent of average cost while regretting that many states were still charging below 50 paise a unit tariff agreed at cms conference in 1996.

Prime Minister Atal Bihari Vajpayee asked the states to raise power tariff for agriculture to 50 per cent of average cost for reviving the state electricity boards (SEBs) and regretted that chief ministers' conference decision in 1996 to charge 50 paise a unit had not yet been implemented totally.

Warning that power sector in the country was on the verge of collapse due to failue of addressing the problems of payment, Vajpayee told the CMs conference on power sector reforms that "reforms can yield good results only if there is good coordination between the centre and the states."

Referring to `unsustainable' annual commercial losses of Rs 24,000 crore by SEBs, he said there were also transmission and distrbution losses of an additional Rs 20,000 crore due to `theft and dacoity'.

Emphasising on appropriate pricing policy in the power sector due to inability of implementing the principle of `he who uses electricity pays for it', Vajpayee said "today there are many other categories of users who get electricity either free or at highly subsdised rates in the name of agriculture."

The situation warranted immediate remedial measures in close coordination between states and centre in view of the massive funds requirement of Rs 800,000 crore needed for the power sector over the next ten years, he added.

Admitting that attempts to reform the power sector have not moved smoothly, Vajpayee said "it is because we failed to address the problems in this sector with a comprehensive and long term national vision."

Several projects promoted by private sector have failed to take off and till date independent power producers have added only 5,000 mw of capacity with another 5000 mw capacity under construction, the Prime Minister said.

Many viable projects have not been able to achieve financial closure due to the inability of the state power utilities to have an adequate payment security mechanism, he said.

Reviving the state power utilities, thus, should be the topmost agenda of this conference, Vajpayee said urging the chief ministers to resolve to eliminate all losses in the power sector within next two years.

Emphasising on the reform process, Vajpayee said "we should have focussed on reforms in distribution before, or at least simultaneously with, those in generation."

The priority should be to make distribution commercially viable so that it could boost private investors' confidence in generation and transmission projects, Vajpayee said adding that "we should also enable some independent power producers to achieve Financial closure at the earliest."

Vajpayee said the comprehensive electricity bill would be introduced in the parliament in the current session and its enanctment would provide a legal framework for state governments to undertake reforms in the power sector.

Complementing the government of Orissa for having taken far-reaching steps in this process, Vajpayee said centre has also taken many steps to support reforms being attempted by the state governments.

"Each state has its own problems and needs to chart its own path for reforms. It is not our intention to present a single blueprint for all the states. The ministry of power is, therefore, entering into state-specific memoranda of understanding to support them to undertake specific time-bound programme of reforms," he added.

He also mentioned that the approach of guaranteed returns to the private power producers resulted in an unacceptably high power tariff. The dabhol power project in Maharashtra is a notable example.

Hoping that the issue of Dabhol Power Project would be resolved soon, Vajpayee said "though the reform process has been a useful learning experience for all of us, this issue has once again highlighted the need for a holistic and long term approach to power sector reforms."