Fortifying The Foundations

The casual visitor to urban Orissa may marvel at the smooth roads, reasonable transport and telecoms systems and steady power and water supply. Talk to entrepreneurs in small industrial townships and the story changes. If there is anything that has prevented this resource-rich state from turning an economic tiger it is lack of infrastructure. Economic reform, which opened the sector to private investment, has brought hope.

Power: current surplus

Orissa was one of the first beneficiaries of the policy attracting private investors who saw opportunity in the states acute energy crisis and vast deposits of coal (47,000 million tonne, 24 per cent of Indias reserves).

 

As of June 1996, the state had lined up 14 power projects, including nine by the private sector. These projects accounted for additional capacity generation of 8,046 MW and involve investment of Rs 28,119 crore.

Right now, this enthusiasm is not being reciprocated by the state government. Part of the reason is political: many of the projects have come up for review because they were proposed during the Janata Dal government.

The state is also going slow because Orissa, which was reeling under an energy crisis from the early eighties, has emerged power-surplus from the first quarter of this year.

Compared with a 15 to 30 per cent shortfall in the eighties and first half of the nineties, power availability now exceeds demand by 200 to 250 MW, says state energy secretary A R Nanda. Power demand ranges from 1,200 to 1,450 MW and Orissa has an installed capacity of roughly 3,000 MW.

This happy situation, a result of capacity additions and reduced transmission and distribution (T&D) losses, is likely to continue. An official study financed by the Asian Development Bank has found that the state would need only an additional 77 MW of power in 1999 and till 2002 the additional requirement would be 250 MW each year. From 2004 onwards, the annual additional requirement would be roughly 250 MW.

Against this, capacity additions of over 1,000 MW have been planned in the state sector alone. Of this, the Indravati hydel project (4x150 MW) is being implemented by Orissa Hydro Power Corporation. Orissa Power Generation Corporation (OPGC) proposes two more units (2x 210 MW) to its Ib Valley complex where it operates two units of similar capacities.

This apart, the state is also to receive 700 MW as its share from the Super Thermal Power Station of the National Thermal Power Corporation (NTPC) coming up near Talcher.

This impending surfeit is encouraging the government to act tough with promoters of independent power projects. The government has already declined to sign firm power purchase agreements with three US-based firms North Eastern Energy , Indeck and Panda Energy Corporation.

These companies had signed provisional PPAs with the previous administration but their projects have been put under review along with that of AES Transpower. Although the government has agreed to honour the firm PPA signed with the AES, it has forced the company to reduce tariffs and relent on certain other concessions during the review.

To streamline the permission process for new projects, the government has decided to discard the controversial route of signing MoUs and go for competitive bidding.

Last year, the state invited pre-qualification bids from private firms. Twenty two companies from both India and abroad including the Tatas, L&T, Marubeni and Reliance group have responded to the offer. But any company that qualifies for the techno-feasibility scrutiny will only be allowed to put up a unit after 2002 AD.

Even without capacity additions, the energy availability position is expected to improve significantly with reductions in T&D losses a major point on the states agenda for World-Bank aided reforms.

Orissa used to record T&D losses of 46 per cent compared with a national average of 25 per cent, but following corrective measures in the past few months, T&D losses have already dropped to 30 per cent, says Chief Minister J B Patnaik, We aim to bring it down to 16 per cent in another three years, he adds.

Orissa has been one of the frontrunners in terms of power sector reforms as well. It was the first to disband its ailing State Electricity Board and divide its functions between three agencies Grid Corporation (Gridco) for T&D, Orissa Hydro Power Corporation for hydel generation and OPGC to develop thermal power plants. A regulatory commission has also been formed to oversee the functions of independent corporations, safeguard consumer interests and help the government make policy decisions.

The World Bank guidelines also suggest gradual privatisation of the corporations, so Gridco has already handed over the distribution of Cuttack. Bhubaneswar and Dhenkanal circles to the Bombay Suburban Electricity Supply Corporation (BSES) under a management contract from September 14. Our main job is to augment the system, check losses, supply quality power and improve revenue collection, says M V Sahi, chairman and managing director of BSES.

Not that the transition has been smooth. Industry in particular has complained of high-handed behaviour from the bill collection staff and abrupt disconnections for delayed payments. But Gridco is unlikely to listen to this grumbling because arrears from big industries have run into Rs 200 crore.

The effects of reform are being felt by other users too. Tariffs have already been revised twice last year at roughly 13 per cent each time. If the World Bank recommendations are heeded, similar increases over the next few years will bring the era of subsidised tariffs to an end.

Transport: missing links

But more than any power project or reforms, it is the announcement in this years Railway budget of a long-standing demand, a separate railway zone for Orissa, that is rated the biggest thing to have happened in the states infrastructure sector. Prime minister H D Deve Gowda has laid the foundation stone of the new East Coast Railway, but it is yet to start functioning for a lack of sanctions.

Today, the total route length in the state is 2165.62 km, or 12.86 km of rail line for every 1000 sq. km compared with a national average of 19 km.

Also, in the past 15 years the absolute increase in rail routes in the state has been only 20 km. In West Bengal, Andhra and Madhya Pradesh the figures are 100 km, 282 and 151 km respectively.

Orissa has also been irked most by delays in railway projects that are key to the states industrial growth. These projects, which have been incomplete for the past two to 12 years, included the 155-km Daitary-Bansapani line, which connects the states iron ore belt and the 134-km Sambalpur-Talcher rail line, which leads to the coal-mining areas. Of a combined investment projection of Rs 1,200 crore in the eighties, only Rs 245 crore has been spent.

To speed up work on the Daitary-Bansapani line in view of the flow of investments in steel (see page 3), the Railways Board has decided to hand over the project to the private sector. It has recently submitted a Rs 2,900-crore proposal to the Exim Bank of Japan, which has evinced interest in financing the project.

In the absence of vital rail links, roads have emerged as the major means of transport in Orissa. However, in remote areas, the inadequacies in road transport are glaring. The total road length in the state is only 2,07,004 km of which 14 per cent is surfaced.

This is also coming under increasing pressure because the total number of registered vehicles, which was 3.11 lakh in 1990-91, has almost doubled.

The widening of the 28-km Bhubaneswar-Cuttack link with World Bank aid of Rs 134 crore and the 33-km Cuttack-Chandikhol link with OECF funds of Rs 174 crore is expected to ease traffic pressure on some of the busiest routes. But with the combined planned investment from the government in the railways and roadways at Rs 620 crore, just 0.8 per cent of investment in the state, the authorities are now seriously considering the option of private participation.