Starting from early 1990s, India initiated reform measures to revamp its ailing power sector. The sector had been opened up for private participation and several measures aimed at restructuring of State Electricity Boards (SEBs) were initiated to make them financially viable entities. But even after a decade of reform initiatives, one of the important goals of reforms namely attracting substantial private investments into the sector has met with little success. One of the major factors that has made the private sector wary of investing in the power sector was the poor power distribution system that has come into place in the country which, in turn, is due to the lack of adequate investment in distribution segment. It thus became clear to the central government that financial support would be required in the form of loans, subsidy/grants in order to improve power distribution. As a result, the central government introduced a scheme called Accelerated Power Development Reform Program (APDRP) in 2000 to reform the distribution segment of the power sector. In this context, this paper is an attempt to provide a critical review of the APDRP by analyzing its pros and cons.
The economic reform measures initiated by the Government of India in the wake of the 1991 balance of payment crisis contained, among others, a package to reform and restructure the ailing electricity sector of the country. The sector had been opened up for private participation and by the mid of 1990s several measures aimed at restructuring of State Electricity Boards (SEBs) were initiated in order to make them financially viable entities. But even after a decade of initiatives there has been no sign of tangible improvements. All the age-old problems facing the SEBs like high commercial and transmission and distribution (T&D) losses, poor cost recovery and pricing, widespread power theft, huge subsidy bills, absence of commercial culture, poor maintenance and utilization of assets and materials, corruption and lack of coordination and accountability continue to be present.
Significantly enough, despite the government's best efforts to make the sector more competitive by way of attracting private investments, not much could be achieved. One of the major factors that has made the private sector vary of investing substantial amounts in the power sector was the poor power distribution system characterized by low cost coverage, high distribution losses, cross subsidies, unfunded losses, electricity thefts, under-investment, and inadequate metering and collectionall caused by the poor financial health of the SEBs. At present revenues of SEBs cover only 70-75% of the cost. There are T&D losses, largely due to outright theft and unmetered supply. The annual losses of SEBs have reached a level of about Rs. 26,000 cr in 2000-01 and the subsidy received from the government covered only 25% of the losses. The gap between average cost of supply and average revenue has been high. The LT-HT ratio is high and the distribution transformer lines are overloaded. The quality of power is poor and unreliable and is a major cause of consumer dissatisfaction. |
