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Tuesday, 31 May 2011 00:00
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With power sector losses sharply escalating, from R26,400 crore in 2008-09 to an estimated R70,000 crore in 2010-11 and a projected R1,16,089 crore in 2014-15 (13th Finance Commission), the government is in over-drive. The power secretary, FE has reported, has asked the Appellate Tribunal for Electricity (Aptel is the highest body for all disputes in the sector) to get information on whether state electricity regulatory commissions (SERCs) have done their job in revising tariffs at least once a year—under Section 121 of the Electricity Act 2003, Aptel has the power to issue directions to SERCs. The VK Shunglu panel, appointed to find ways to improve the finances of power utilities, has even suggested that these non-performing regulators be asked to go. The Tamil Nadu electricity board, for instance, has just filed for a tariff revision in 2010-11, after eight years. Meanwhile losses in the SEB have skyrocketed to an estimated R30,000 crore.

The immediate casualty could be bank loans, and the Shunglu Committee is concerned that working capital funds could be at risk. While the situation is a far cry from that in 2000-01 when power sector overdues touched 2% of GDP, things have started going bad again. In 2008-09, the Power Finance Corporation reported that of the R29,665 crore the state governments had to give various power utilities for selling power below cost to farmers, they paid just R18,388 crore, In states like Maharashtra and West Bengal, no payments were made in 2008-09 and 2009-10.

The principle of appointing electricity regulators, as in other sectors, was to insulate power utilities from the political process. The way things were envisaged, the SERC would ensure that genuine hikes in tariffs were passed on to consumers; the SERC would also ensure that frivolous costs were not entertained. Sadly, SERCs have proved completely unequal to the task.


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