Punjab Chief Minister Parkash Singh Badal this month sought yet another extension from the Centre for unbundling the Punjab State Electricity Board (PSEB). However,after allowing nine extensions in seven years,the Union Power Ministry has asked the state to take an in-principle decision and chart out a roadmap for corporatising the PSEB. The state Government has been dithering over the decision for several years now,citing massive outstanding arrears,even as there are fears that the PSEBs employee unions could create trouble once this process is rolled out. What unbundling seeks to achieve and why not everybody wants it: •What is unbundling of state power boards? The Central Electricity Act of 2003 prohibits state electricity boards (SEBs) from functioning as integrated power utilities. It makes it mandatory to divide them into separate entities for handling transmission,generation,distribution and trading functions. •How many separate entities does the Act mandate? Under the Act,there is no restriction on generation,distribution and trading of power,but it is mandatory that transmission is handled by a state-funded entity that is neutral to all players in the power field. States can opt for their own model. Most states such as Haryana,Orissa,Andhra Pradesh,Karnataka and UP have unbundled their electricity boards into separate companies for power generation,transmission and distribution,while some like Rajasthan have divided the board into five companies one each for generation and transmission,and three for distribution. •What does unbundling aim to achieve? A part of power sector reforms,unbundling was made mandatory as most state electricity boards were functioning as loss-making entities with high outstanding dues,owing to basic inefficiencies in their functioning. Restructuring these boards is aimed at promoting greater efficiency by streamlining operations of distribution,transmission,generation and trading,while also promoting transparency and accountability. •How does it affect the legal status of boards? Unbundling would result in corporatisation of the state power boards,as the new companies fall under the purview of the Companies Act. •What is the opposition to unbundling? The main opposition to unbundling is from employee unions,as they fear it would lead to privatisation and subsequent job losses. Some farmer bodies are also opposed to the move. Also,unlike in an SEB structure,where all accounts for transmission and distribution remain common,separate handling of each function would make it easy to identify who is losing how much money and where. The stiff resistance from employee unions is why some state governments are still reluctant to unbundle their electricity boards. •How long does the process take? Once a state decides on the roadmap and model,unbundling can take from eight months to over a year. The procedure for unbundling an SEB includes transferring its assets and liabilities to the state government through a transfer scheme,followed by its subsequent transfer to a government company. The new companies start with clean balance sheets after outstanding arrears of the board are cleared. •What is Punjab losing by not unbundling PSEB? To begin with,restructuring will help restore financial viability of the PSEB,which is reeling under mounting debt and high accumulated losses. It will also bring to light the actual magnitude of transmission and distribution (T&D) losses as SEBs generally hide a lot of inefficiencies in the name of T&D losses. Most importantly,it will help cash-starved Punjab avail of funds and grants from the Centre linked to the execution of power reforms in the state. •Has unbundling had the desired results in all states? There are examples of states where the results of unbundling have not been satisfactory,Orissa and Delhi being glaring examples. However,in Gujarat,reforms have yielded results,including 24-hour power supply without any cuts during the last one year and a steep fall in transmission and distribution (T&D) losses. In some other states such as Haryana it has had mixed results. •How many states have yet to unbundle their boards? The seven states that are yet to unbundle are Kerala,Tamil Nadu,Bihar,Jharkhand,Punjab,Himachal Pradesh and Meghalaya. However,after they were given a final deadline June 30 by the Union Power Ministry,Tamil Nadu has already taken a Cabinet decision while Bihar and Jharkhand are approaching the Cabinet. Kerala has already published a transfer plan,while Himachal Pradesh this week issued a notification transferring all assets and liabilities of the HPSEB to the state government. The state Governments next step will be to exercise its powers to revest the property and liablities to another company or set of companies to be formed later. Punjab is yet to take a decision. With inputs from Ashwani Sharma
