Discoms can run well in both govt and private sectors: WB official

In Andhra Pradesh, discoms continue to be state-owned utilities, especially in bringing efficiencies and reducing technical losses

It is the implementation and not the policy framework that is responsible for the continued challenges being faced by the India power sector, according to Sheoli Pargal, economic adviser, World Bank.

Most of the power sector problems along with their remedies lie in the area of distribution and, therefore, it is imperative for the states to run the discoms efficiently and also operate them on commercial lines, she said here on Monday.

Author of the report, ‘More Power to India: Challenges of Distribution’, Pargal said it was immaterial if the discoms were owned by the state or the private sector as long as they were run on commercial lines, in a departure from the earlier stance of the multilateral lending agency where privatisation along with the unbundling of the power sector was also suggested as a part of the power sector reforms in India.

There are good models on both the sides, she said. In Delhi, Mumbai and Kolkata where the distribution is in the hands of private companies, the power sector has done well and the same was also true in states like Andhra Pradesh where the discoms continue to be state-owned, especially in bringing efficiencies and reducing the technical losses among other things, the World Bank economist said.

However, when asked about Delhi chief minister Aravind Kejriwal's claim that the power charges in Delhi could be reduced by 50 per cent, she said the research team had not gone into the cost of services to be able to say anything on that front.

Though Andhra Pradesh was an early reformer, the state power utilities started making losses due to a sharp rise in power purchase costs mostly on account of short-term purchases, which rose from Rs 2.81 per unit in 2009-10 to Rs 4.25 per unit in 2012-13 besides other reasons, the report stated.

On the one hand the power utilities had got into a financial mess by resorting to more and more short-term borrowings as they were not fully compensated towards the cost of power and on the other hand these not-so-well targeted power subsidies denied the other social sectors of their due share of development, the report pointed out. “About 15,000 new hospitals and 1.2 lakh new schools could have been funded in 2011 if the power sector had not pre-empted these funds by way of subsidies,” Pargal said.

Fixing up of accountability at the distribution end, implementing the Electricity Act mandates on tariff, open access and standards of performance, ensuring regulatory autonomy and making available high-quality updated data to bring transparency in decision making and avoiding government interference with internal operations are some of the recommendations made by the report as a way forward to overcome the current problems.

The report was submitted to the Government of India in June last year.