Prabhu makes another attempt at power reforms

Prabhu makes another attempt at power reforms
SANTANU GHOSH

New Delhi, March 3: While the government decided to adopt a host of resolutions on the power sector reforms, including rationalisation of tariffs and one time settlement of dues of State Electricity Boards (SEBs), the question remains on how far are these resolutions viable and feasible.

According to the resolutions adopted at a meeting between the Prime Minister, the power minister and the state chief ministers and power ministers, it was decided to go in for one-time settlement of power dues through issue of bonds by the SEBs to the central utilities. According to the power minister, an expert group would be set up (which would submit its report in three weeks time), consisting of the power minister and the state chief ministers, which would recommend the details of the bonds, including the maturity period and interest rate. The respective states would stand guarantee for these bonds. Given the fact that the SEBs owe about Rs 26,000 crore to the central utilties, doubt still remains on how the states would retire the amount after maturity (with interest the burden is likely to go up further). Prabhu's solution to this is longer maturity of bonds if necessary. Well, how long?

According to the power minister, all chief ministers (16 CMs and 2 state power ministers attended the meet) unanimously resolved to achieve the break even of SEBs within 2 years as part of the power sector reforms. The modus operandi of achieving this has been left to the individual states. Going by the results of the year 1998-99 (only three SEBs out of 26 were in profit (Maharashtra, Meghalaya and Goa) and the total annual loss of the SEBs stood at Rs 14,460 crore), it would really need a Midas touch to heal.

In fact, according to PTI, most of the states have sought immediate central help to overcome the financial crunch of their SEBs while promising to undertake reforms for the development of power sector. " Agreeing for a time bound programme for metering in the power sector, the CMs participating in the conference said that they did not have money to clear the outstandings of central PSUs and SEBs also needed substantial cash flow to undertake reforms". Hence, it becomes the classical case of the hen and the egg .. which came earlier.

Further, according to Prabhu, all the states expect Tamil Nadu and Punjab accepted the need to fix a minimum power tariff of 50 paise per unit in order to recover user charges. This again was a decision of the past and till date very few states have tried to implement it. Talking to The Indian Express, Suresh Prabhu stated that to enforce this, states would be asked to provide from their budget if they want to subsidise power beyond the stipulated tariff.

However, for further consensus on the various issues of the power sector reforms, the CMs urged the Prime minister to convene an all-party meeting including leaders of Opposition in state assemblies.

Prabhu also assured all financial assistance to states opting for implementation of reforms for which MoUs are being signed between states and centre. In reforming distribution, the CMs agreed on setting up and operationalising an effective management information system besides achieving the project of full metering of all consumers by end of December, 2001. A high level empowered group comprising of several CMs and power minister would be set up to coordinate and monitor and review the implementation of reforms.

Other decisions in the meeting included making State Electricity Regulatory Commissions (SERCs) functional within the next six months and implementing their tariff orders, amendiing certain provisions in the Forest Conservation Act, setting up of National Grid for inter-regional transfer of power on a priority basis and speeding up rural electrification.

Bold by how pragmatic?
1) One time settlement of SEB dues to central utilities through bonds; expert group to decide on time period and interest
2) SEBs to breakeven in 2 years time; method left to states
3) Minimum tariff of 50 paise per unit; states to pay from their budget for further subsidising tariff.
4) High level empowered group of CMs and power minister to review reforms
5) Financial incentives for states undertaking power reforms.