Power supply: Prabhu panel for state-specific models

Proposes debt recovery, tariff rationalisation, cut in losses, removal of generation and transmission bottlenecks

The central government’s advisory group on power distribution reforms favours state-specific plans, instead of one model for the country.

It has also pushed debt recovery, rate rationalisation and and addressing of distribution losses, which, in some states, are 45-80 per cent.

The Prabhu panel has already given reports on the coal sector and thermal power projects. It has asked the Union ministry of power, Power Finance Corporation and Rural Electrification Corporation to work out state-specific action plans.

The group’s member-convenor, R V Shahi, told Business Standard that distribution reforms meant loss reduction, improving the reliability of supply and rate rationalising. He said five states — Andhra Pradesh, Rajasthan, Madhya Pradesh, Tamil Nadu and Haryana — constituted 80 per cent of the total annual loss (of Rs 80,000 crore as on date.

The managing director of a state-run distribution company (discom), who has given ideas on the issue to the ministry, said distribution reforms cannot become successful till generation and transmission bottlenecks were removed. ''Feeder separation, a great hit in Gujarat and Maharashtra, cannot be implemented in the same manner in, say, Bihar. Instead, a state-specific feeder separation model is the need of the hour,” he said.

Pramod Deo, former head of the Central Electricity Regulatory Commission, said: “The Electricity Act of 2003 sought to limit government interference in utility operations. Yet, state governments, being owners, have a generally detrimental impact on operations.”

They have added to discoms’ financial difficulties by compelling them to borrow to cover operational expenses (with underrecovery of power purchase costs and incomplete or late subsidy payments by state governments), by applying political pressure on them and regulators to keep rates low, and by asking them to purchase power during elections to keep voters happy.”

Deo called for sincere efforts at the highest political level, to sit with state chief ministers and arrive at a political consensus on what should be the subsidy to agriculture and targeted low-income sections, and how to pay this. And,provide sufficient funds to state utilities to meet operating expenses, and improve their governance by selective privatisation or franchisation.

A World Bank report, issued in June, had made a strong case for freeing utilities and regulators from external interference, increasing of accountability and enhancing competition in the sector.