Power funds to states to be linked to performance

JULY-SEPTEMBER, 2002

VOL. 3 NO.3

Power funds to states to be linked to performance

The Union government is trying to link provision of funds to the states under the accelerated power development programme (APDRP) to the latter’s “result –oriented response “ to the ongoing power sector reforms, according to Mr. R.V. Shahi , Secretary, Ministry of Power.

He said that to secure funds under the programme, the states would have to demonstrate tangibly that the gap between the cost of power supply and the revenue collected was being bridged. The crux of the problem was how to make the power sector commercially viable.

The centre has allocated Rs. 3,500 crore for APDP during the current fiscal. The states have to make matching investments in the power sector to secure these funds. They could select a particular area or city to demonstrate the improvements made.

Inaugurating a round table discussion on “Electricity in India”, Mr Shahi said that there was a proposal that services of the central organisations such as the National Thermal Power Corporation (NTPC) and Powergrid Corporation should also be provided to the States on the basis of the latter’s response.

“There is no point in supplying power without receiving payments. NTPC is a company and it has to operate on commercial lines”.

The round table conference, held here on Monday, was jointly sponsored by the Administrative Staff College of India (ASCI), the Ministry of Power and the International Energy Agency (IEA).

Mr Shahi said that the power sector in the country was at the crossroads today. The results of the reforms, ushered in a decade ago, were not satisfactory. “We had reached a stage where Indian lenders to power projects have become indifferent and the foreign lenders were reluctant to put in their money.”

In the past decade, he said, total losses of the States electricity boards had increased from about Rs 3,000 crore to Rs 30,000 crore per annum. While the SEBs used to recover 85 per cent of the cost of power supply in 1991, today they were only recovering 69 per cent of the cost involved. So, “who will come to put themselves in the shoes of the lenders and developers?”

The “tragedy” of the power sector, Mr Shahi said was that either “we did not know about the huge distribution losses for a long time or we did not want to know about it.” In fact, in the last three years, the Ministry of Power had acknowledged that reforms on the distribution side would have been more fruitful than laying over emphasis on the generation side.

Mr. Ajay Shankar, Joint Secretary, Ministry of Power, that dramatic turnarounds were not possible. Large-scale inflow of investments into the sector was not possible till its commercial viability was established.

The ASCI Principal, Dr E.A.S. Sarma, said that electricity in the country was a mixture of politics and economics.

Courtesy: Business Standard dated April 22, 2002


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