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Independent power bodies fail to deliver: IIPA

A RECENT Indian Institute of Public Administration (IIPA) study conducted at the behest of the Union Power Ministry to assess the impact of power reforms in 12 States has put Uttar Pradesh in a very poor light.

india Updated: Nov 04, 2006 01:44 IST

A RECENT Indian Institute of Public Administration (IIPA) study conducted at the behest of the Union Power Ministry to assess the impact of power reforms in 12 States has put Uttar Pradesh in a very poor light.

The IIPA had formed a group of experts under the chairmanship of its Director, PL Sanjeev Reddy, a retired IAS officer, for carrying out studies in 12 States. The responsibility for conducing the study on “Impact of Restructuring on Uttar Pradesh Power Sector”, was given to former Delhi Electricity Regulatory Commission Chairman, VK Sood.

In his report submitted to the IIPA which in turn forwarded the same to the Ministry of Power, Sood has found the Government of UP’s exercise to un-bundle the UP State Electricity Board (UPSEB) and creating three independent corporations in 2000 with an aim to provide commercial viability to the power sector and quality power to its citizens at affordable rates, has failed to effect desirable results.

He has substantiated his findings with data and also offered some suggestions.

“In UP, most of the power entities are still being headed by a single Chairman and Managing Director (CMD). This has considerably negated the benefit of unbundling to the individual power companies and the situation at present as evident from the data provided in the report, is no better than during the erstwhile UPSEB,” says the report.

It also suggested: “The State Government being the owner of the Corporations should ensure that they have independent functioning and follow the principle of one-man-one-post to foster a competitive environment in operations and facilitate the benefit of unbundling and reforms to percolate down to the consumers in terms of higher efficiencies and quality service at an affordable cost as stated in mission statement of UP power sector reform programme.”

The State Government, states the report, also need to ensure that the individual entities have the right institutional arrangements, which promote efficiency, and improvement both in terms of cost reduction and increase in collection.

The Corporations need substantial institutional strengthening and operational planning. They lack trained technical, financial managerial manpower at all levels.

“This is evident from the fact that the Corporations created under the first transfer scheme had only one Company Secretary and a common Finance Director,” it pointed out.

The DISCOMs are to maintain their separate funds and work independently, but in practice, the study discovers, such freedom/autonomy is not being experienced at present.

The fund flow is from DISCOMs to UPPCL and is again redistributed among the DISCOMs.

This way even a better performing DISCOM may not get its proper share and has to compensate from its share to other DISCOM whose performance is relatively poor but needs are more. This spirit discourages the real ability to perform better.

“This should be discontinued and each DISCOM should be made accountable for its energy handled, sold, asset management and revenue matters,” the report suggested.

The report highlighted the issue of widening demand-supply gap in the State, which it said has choked State’s economic development.

“The State of Uttar Pradesh is in a severe supply shortage. The quality of supply in urban areas itself is extremely erratic and pitiful, not to talk about rural areas.

The poor supply situation is choking industrial and commercial growth in the State, and in turn, affecting economic development of the State,” the report stated and suggested, “The State needs to augment generation capacity within the State urgently, to improve supply conditions.”

The problem of mounting arrears in the books of the distribution companies, said the reports, is an area of critical concern. Poor collections from Government Departments/Institutions form a considerable part of the total arrears.

“The poor collection levels, coupled with the high level of T &D losses is pushing the State power sector into severe financial constraint so much so that the companies are not able to garner sufficient financial resources to pay for adequate power purchase to Central utilities and State generating entities.

This in turn is leading to financial un viability of the generating sector as well,” mentions the report.

Director  (Ministry of Power), Alok Kumar told the Hindustan Times from Delhi on phone that reports were being studied before they were forwarded to the States concerned for their comments.