Monday, March 6, 2000,
Chandigarh, India



Woes of the power sector

IN his article “Turmoil in power sector” (The Tribune, February 28) Mr N.S. Vasant has given a very clear view of the present situation of the power sector. This position has reached not within a period of a few years but over a period of a few decades.

Successive governments have been trying to make quick-fix arrangements which could pay dividend and show results within their tenure but without long-term planning. There have always been slippages in capacity addition. State governments did not allow the SEBs function as truly commercial organisations.

I expected some positive and practicable suggestions from Mr Vasant because of his long experience with the PSEB and association with the Punjab Government as Adviser (Power). But I find he wants the SEBs to function within those parameters and constraints because of which they have been going from bad to worse. He wants the Chairman and members of a board to be appointed with specific tenures of three to five years.

  By and large, the Chairman and members of a board are appointed for fixed tenures. At least the Chairman on his appointment should not agree to accept the responsibility for a period less than three years, to be extended up to five years on the basis of his performance. But it has been observed that once they are in position their priority is to stay in position instead of acting with the honesty of purpose.

Performance has not been considered the only criterion for further extension in service.

We expect the state governments (politicians) to get interested in the improvement of working of the SEBs.

Budgetary support for power projects in the public sector has been suggested. The Ranjit Sagar Project is one of the many examples where tax-payers’ money has been squandered without any accountability. Everyone is interested in having one’s share in the pie, which public sector projects offer in plenty. The RSD project was guaranteed to be completed by 1992 by a consortium. Let those who opposed the offer be made accountable.

World Bank loans and restructuring of SEBs may only be quick-fix arrangements to achieve some projected targets and to cover the failures of successive governments both at the Centre as well as in the states. It will be at the cost of the interests of consumers, particularly the less privileged.


Policy decisions: State Electricity Boards (SEBs) were constituted by an Act of Parliament in 1948 for the integrated growth of the power industry in the country. In the wake of successive droughts and consequent chronic food shortages in the 1960s, rural electrification was encouraged through budgetary support for the exploitation of underground water potential by the use of tubewells.

At the end of 1997 the number of pumpsets running all over India was 11.8 million. The share of agricultural consumption in the total sales has increased from just 4 per cent to 30 per cent. In the early 50’s only 0.54 per cent villages were electrified, but today more than five lakh of the six lakh villages in India have already been electrified — about 85 per cent. Per capita consumption has increased from 15.6 units to 350 units. Although rural electrification was unremunerative in nature due to a low tariff, high power losses and a huge maintenance cost, to achieve self-sufficiency on the food front and to improve the rural economy, no government thought of commercial viability of the SEBs. Section 59 of the Electricity (Supply) Act, 1948, make it mandatory for the state governments to allow the SEBs to fix their tariff in such a way as to ensure a minimum 3 per cent rate of return (ROR) on their fixed assets, yet successive governments have violated this provision, resulting in the deterioration in the financial health of the SEBs.

The additional revenue mobilisable with 3 per cent ROR in the past seven years (1992-93 to 98-99) would have been Rs 66,724 crore. So, where is the resource crunch?

It is distressing that on the one hand the government is allowing a minimum 16 per cent return to private operators in the power sector but on the other the SEBs are being denied even a 3 per cent return. Some of the states like Punjab even allow free electricity to a section of the consumers without compensating the SEB. How a commercial organisation can think of providing free electricity to a section which consumes more than 30 per cent of the sales.

The tragedy is that policy decisions regarding the power sector are taken by bureaucrats and politicians having little knowledge of the subject. Reforms in the power sector can be carried out more effectively without unbundling the SEBs provided eminent power engineers are involved in the policy-making process.


Hike in college fees

The decision of the Ministry of Human Resource Development to revise upward the college and university fees from the forthcoming session is a wise step. It will certainly downsize the herd of boys and girls clamouring for admission in colleges after passing the 10+2 exams. Lesser people having access to higher studies means a lesser problem of unemployment. Moreover, the nation will no more require intellectuals and scholars because they are a burden on the national exchequer. This will also help us in containing the deficit budget and make the country cash rich.

Alternatively, the energy of the youth can be best channelised in fish catching, bee keeping, papad making, candle making, clay modelling, carpentry, scooter repair and trye puncturing of bicycles. They can very easily engage themselves in the fastest growing field of courier delivery agents, newspaper vendors and door-to-door selling of FMCG right from aggarbattis to aquaguards.

It will also revive the long-cherished dream of Mahatma Gandhi for a swadeshi movement. Such novel idea of making higher education costly is a gift by the present government in this millennium. In no time again there will be thumb rule and no tension of higher education on the minds of the country’s youth. I am confident the government will soon come out of with many more such thoughtful decisions to enable us to act as a global player. It is rightly said: “I love my India.”



How to reduce tax evasion

IT is foolish to expect anything spectacular from any Indian Finance Minister. These people draft budgets with a close mind. They are never innovative. One year they give something and next year they take away the same. They have neither the sense of direction nor thought. They are rarely innovative.

Taxes on dividend income were abolished only two years back as it resulted in double taxation. But 20 per cent dividend tax is nothing but cheating. Once you tax a company at the rate of 35 per cent plus surcharge, then why should its profit distribution be taxable?

If income tax rates are uniform at 20 per cent, I am sure black money in India will evaporate overnight. There will be full tax compliance, and tax collections will reach sky high. Instead of individual taxation, the concept of family taxation should be introduced. This will not only reduce the evasion of taxation but also streamline the tax administration.

All public sector undertakings except infrastructure and essential ones should be disposed of. Telecommunications, power distribution and roads should be shifted to the private sector. A level-playing field should be provided to Indian industry by rationalisation of customs and excise duties and by abolishing the inspector raj. Rates of taxes and duties should be such that there is no premium on dishonesty and corruption.

Chartered Accountant


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