|Flash back a decade|
|Wednesday, 03 August 2011 00:00|
The demands for a second bailout by the state electricity boards comes just a decade after the first one which cost the economy R35,000 crore. This shows how little electricity reforms have moved since then despite the passage of the Electricity Act of 2003. It is indeed an irony that although the bankrupt SEBs were the fundamental trigger for rolling out reforms in the power sector, the boards still run at losses. Most recent figures from 2008-09 show these are at R50,585 crore. Since then, recent reports indicate the losses will top even the projections of R1,16,089 crore made by the the 13th Finance Commission for 2014-15. If the state governments have to carry the pail again, it will wipe off all the benefit from the tax buoyancy that is expected to come from the introduction of the goods & services tax and put them on the line for central support again. The consequent impact on capital investment and on growth is obvious.
The Electricity Act laid the institutional framework for unbundling the generation, transmission and distribution of power as well as setting up of state regulatory commissions to fix tariffs. But political pressures continued against the reduction of cross subsidies like free power and against the cutback of distribution losses. Most recent numbers show that the share of costs recovered by the SEBs has continued to deteriorate from 82.5% in 2006-07 to 77% in 2008-09. Losses made per unit of power sold, after accounting for subsidies, have touched 60 paise in 2008-09. Though agriculture consumes around a third of the power sold by utilities in states like Haryana, Karnataka and Andhra Pradesh, the segment provides just less than 7% of their revenues. Despite some progress, the distribution losses still remain excessively high at 28.4%. The profits of a few SEBs—including Delhi, Chhattisgarh, Gujarat, West Bengal, Kerala and Orissa—of a few hundred crore rupees in 2008-09 are dwarfed by the losses of Rajasthan (R7,325 crore), Uttar Pradesh (R7,168 crore) and Tamil Nadu (R6,640 crore). This time, the SEBs cannot blame private producers of selling at high tariffs or point at the industrial sector, the chief source of revenue, for running away to other sources. The rot lies within.