Generating hope

While the numbers for the current year are yet to be finalised, the initial indications suggest that reforms in the power sector may be beginning to produce results.

This appears to be the result of generous assistance by the central government under the Accelerated Power Reforms Development Package (APRDP) as well as the fact that most states now have independent power regulators.

This year’s financial losses in the electricity sector, according to the power ministry, may be lower than last year’s by 10–15 per cent.

In Andhra Pradesh, for instance, the losses came down from Rs 2,936 crore in 2000-01 to Rs 2,823 crore the following year, and to Rs 1,248 crore in 2002-03 (this was before the latest promise of free power to farmers, and so the credit should go to Chandrababu Naidu).

Similarly, Gujarat has seen a reduction from Rs 4,422 crore in 2000-01 to Rs 2,281 in 2002-03.

In both states, transmission and distribution losses have fallen dramatically, from 33 per cent to 17 per cent in the case of Andhra Pradesh, and from 40 per cent to 30 per cent in the case of Gujarat.

The cautionary point is that state electricity boards have a history of changing their numbers. The Tamil Nadu electricity board, for instance, reported a loss of Rs 1,305 crore in 2000-01, this went up dramatically to Rs 5,174 crore in 2001-02, and then fell equally dramatically to Rs 2,100 crore in 2002-03.

One reason for such dramatic hikes in loss levels reported could be the desire to claim more resources from programmes such as the APRDP, for loss reduction. It also remains true that the uncovered cost of supplies remains quite large in even the states that have done better than most.

In Gujarat, the uncovered cost of supply was still a whopping 70 paise per unit of electricity supplied in 2002-03.

While some regulators, like those in Tamil Nadu and Andhra Pradesh, have managed to get states to provide explicitly for subsidies in their annual budgets in case they wish to supply below-cost power to certain classes of people, the role of regulators remains patchy.

In Delhi, the regulator who has recently retired was not able to ensure private distributors stuck to their promised investment schedules for strengthening the distribution network, even though consumer tariffs were hiked to take this investment into account.

And the government still hasn’t appointed a successor to the gentleman who has retired as the Delhi regulator. As for generating competition through open access, there has been tardy progress despite the Electricity Act mandating that this be done.

In the one case where a user was allowed open access and permitted to move to an alternative supplier, the regulator fixed such a high surcharge that it no longer made economic sense for the buyer to bypass the state electricity board.

Also, though private traders have got licensed to buy and sell power across state boundaries, they are finding it near impossible to be able to get clearances to carry their electricity on various transmission corridors as the regulators are not able to stand up to the state electricity boards, which stand to lose high-value customers if this is allowed.

Some progress has been made over the last couple of years, but the sector is not out of the darkness as yet.