The Odisha Government has been the biggest beneficiary of the power sector reform process, raking in direct and indirect benefits to the tune of Rs13,918 crore, or say, Rs14,000 crore. The State, which pioneered the reforms with assistance from the World Bank one and a half decades ago, aimed at facilitating participation of private sector and taking measures conducive to development and management of the electricity industry in an efficient economic and competitive manner.
leave aside ploughing back the money into the sector, Rs 6,700 crore by way of surpluses earned from export of power on account of consecutively good monsoons was used to wipe out past liabilities, even those liabilities which were incurred before the distribution companies were privatised. All this showed as if reforms were launched only to meet past liabilities, and as a result of this short sightedness, the State, more often than not, experiences power shortages, underdeveloped distribution companies and mounting losses that threaten to spiral out of control.
It may be noted that prior to privatisation, the annual subsidy support provided by the Government was to the tune of Rs 250 crore per annum. And yet, the Naveen Patnaik Government did not think it wise to invest part of the pie to accelerate the ongoing reforms process. Immediate gains in terms of system upgradation through infusion of World Bank loan along with Upper Indravati coming on stream improved the quality of power supply leading to zero power cuts, but “sustainability” of the sector as a whole always remained a matter of grave concern, experts said.
The projections made by the World Bank on the basis of certain assumptions went horribly wrong. Industrial loads, as forecast, never matured and estimates on the loss levels prevailing at that point of time were way off the mark. The variation between the forecast and actual loss levels were more than 10 per cent leading to inadequate cost recovery through tariffs.
In a bid to arrest the decline, in 2001, the Government appointed a Committee of Independent Experts headed by Sovan Kanungo, to suggest midcourse correction in the reforms process. The committee, amongst many suggestions, stressed upon the need for interim financing to the tune of Rs 3,240 crore from the World Bank and the DFID to stabilise the power sector, particularly distribution, which is the weakest link in whole power value chain.
Incidentally, four Discoms have a cumulative loss of over Rs 5,000 crore, of which the OERC-managed CESU only accounts for about Rs 2,500 crore. The Government preferred to sit over the committee’s recommendation and did not take any proactive measure. As a result, the power sector continues to move in spurts and starts, threatening to die down anytime.
Even then, Odisha today continues to have one of the lowest tariffs of domestic category @ Rs 2.30 per unit compared to Bihar (Rs.2.85), Jharkhand (Rs 2.40), West Bengal (Rs.4.46), Chhattisgarh (Rs 2.70). Delhi (Rs 4.00), Punjab (Rs 4.56). The majority of the States are having Rs 3 and above. Odisha is the only State to discontinue the subsidy while 13 States continue to provide subsidy to the sector.
Still worse is the fact that Odisha has been badly hurt by the Union Government’s decision to deny private electricity distribution companies in the State access to the Rs 51,577 crore earmarked for the Restructured Accelerated Power Development and Reforms Programme (RAPDRP) assistance during the 11th Plan.
In the past, three Discoms tried to raise debt and, in fact, got an in-principle approval from the Rural Electrification Corporation (REC) as a loan against hypothecation of assets for undertaking network augmentation programmes to reduce commercial losses. But neither the Gridco nor the State Government agreed to release assets previously hypothecated to them.
Interestingly, the assets of the Discoms are by their very nature immoveable and can neither be siphoned away nor sold stealthily. The NTPC Bonds continue to remain as an element of discord even after eight long years, ever since the OERC took cognisance of it. Over the years, the issue has been lost to personal biases and prejudices of individuals representing each side while the OERC and the State Government watch helplessly.
The fallout of the NTPC imbroglio is that the Discoms’ assets remain locked in hypothecation against a loan of Rs 400 crore, which in any case has got resolved through a Cabinet approval of onetime settlement of the NTPC dues by the Gridco. The fallout is that the Discoms cannot even use their assets to raise loans from the market.
The impasse in the power sector continues unabated and the bubble may burst anytime derailing the whole reforms process, observers said.
