Sunday, March 4, 2001,
Chandigarh, India


M A I N   N E W S

PM for hike in farm sector power tariff
Tribune News Service

New Delhi, March 3
In a move to bring about political consensus on the power sector reforms, the Prime Minister, Mr Atal Behari Vajpayee, today called for time-bound measures, including raise in power tariff for agriculture.

“Closely linked with the strategy to revive the State Electricity Boards (SEBs) is the question of agricultural tariff. I believe that our farmers will support our initiative if we sincerely explain our overall reform strategy to them,” Mr Vajpayee said, addressing the Chief Ministers’ conference on Power Sector Reforms, here.

Mr Vajpayee urged the states to raise power tariff for agriculture to 50 per cent of the average cost for reviving the SEBs.

A comprehensive Electricity Bill would be introduced in this session of Parliament and its enactment would provide a legal framework for state governments to undertake reforms.

Warning that power sector in the country was on the verge of collapse due to failure of addressing the problems of payment, the Prime Minister said, “reforms can yield good results only if there is good coordination between the Centre and the states.”

“Only 40 per cent of the power supply in the country is billed. And not all those billed are made to pay. The combined effect is the stupendous losses to our SEBs, which now stand at an unsustainable level of Rs 24,000 crore each year. These losses have also further worsened the fiscal health of many state governments,” he said.

The situation warranted immediate remedial measures in close coordination between states and Centre in view of the massive funds requirement of Rs 800,000 crore needed for the power sector over the next 10 years, he added.

The Prime Minister said the industry and agriculture could not compete in the international market nor could they ward off competition by foreign products in the domestic market, without reliable supply of electricity at an affordable cost.

“The process of globalisation will further accentuate these disadvantages, if we do not take immediate remedial steps,” Mr Vajpayee said.

Admitting that attempts to reform the power sector had not moved smoothly, Mr Vajpayee said, “It is because we failed to address the problems in this sector with a comprehensive and long-term national vision.”

Several projects promoted by private sector have failed to take off and till date independent power producers have added only 5,000 mw of capacity with another 5000 mw capacity under construction, the Prime Minister said.

Many viable projects have not been able to achieve financial closure due to the inability of the state power utilities to have an adequate payment security mechanism, he said.

Recalling the grid collapse in the Northern region on January 2, he said, “Lack of grid discipline was the main cause. I would like the Power Ministry to improve its mechanism for grid management so that any such failure can be set right in a reasonable time.”

Reviving the state power utilities, thus, should be the top-most agenda of this conference, he said, urging the chief ministers to resolve to eliminate all losses in the power sector within next two years.

Emphasising on the reform process, Mr Vajpayee said, “We should have focused on reforms in distribution before, or at least simultaneously with, those in generation.”

The priority should be to make distribution commercially viable so that it could boost private investors’ confidence in generation and transmission projects, he said, adding that “we should also enable some independent power producers to achieve financial closure at the earliest.”

Addressing the conference, the Union Finance Minister, Mr Yashwant Sinha, said the government was ready to a one-time settlement for clearing the outstanding dues of SEBs to central PSUs, if the states agree to adhere to a time bound reform programme to guard against future losses.

“We can think of a one-time solution to SEBs outstandings. We can find money to help states, provided states agree to adhere to a time-bound reforms programme,” Mr Sinha said.

The Finance Minister said that an expert group comprising representatives of state governments, PSUs, financial institutions and the Centre could work out a package in the next 2-3 weeks for settlement of dues provided the Chief Ministers agreed for a firm programme of reforms and signed a memorandum of understanding with the Centre towards this.

This would be in addition to the securitisation package proposed by him earlier, Mr Sinha said.

The Union Power Minister, Mr Suresh Prabhu, called for effective management of the distribution of the electricity generated in the country.

“Losses due to theft and pilferage were estimated to over Rs 20,000 crore every year and in the absence of metering, the farmers were blamed,” he said.

Stressing the need for political will on the part of the state governments, he said measures must be taken to reduce the losses in the distribution system to ensure supply of electricity to the people.

The Power Minister said about 10 per cent of the losses could be reduced through modest investment and improvement in the sub-transmission and distribution systems.

Reforms in the power sector were urgently needed and these could be effected by privatising the system and empowering panchayats and local bodies, he said.


Punjab opposes call to hike power tariff
Tribune News Service

New Delhi, March 3
The Prime Minister’s call for hike in power tariff for farmers, was opposed by Punjab and Tamil Nadu at the Chief Ministers’ conference on power sector reforms.

Mr Atal Behari Vajpayee urged the states to raise power tariff for agriculture to 50 per cent of average cost for reviving the State Electricity Boards.

The two states opposed the idea on the grounds that they had effective mechanism to monitor the power usage by individual consumers, the Union Power Minister, Mr Suresh Prabhu, said.

Briefing newspersons on the outcome of the meeting, he said all states had agreed to carry out reforms in the power sector and have agreed to depoliticise the issue.

The meeting had agreed to constitute an expert group, with Union Power Minister and state chief ministers on carrying out reforms, especially in distribution. The states would come out with its own reform path before the expert committee, and it would submit its report within three weeks.

A high-powered committee would monitor the performance of reforms being carried out by the states and would meet quarterly, he said.

Mr Prabhu said all states had agreed to sign a memorandum of understanding with the Centre to carry out power sector reforms.

The MoU envisage unbundling of transmission and distribution and privatisation of distribution in a time bound manner, 100 per cent electrification of villages, energy audit at all levels, full support to the regulatory commission.

In turn, the Centre would provide technical and financial support for reduction of T&D losses, strengthening and improving the transmission network, rural electrification programme, structural adjustment, new generating capacity and allocation of additional power to these states from central generating stations.

The power demand at installed capacity requirement at the end of the 11th plan would be 2,12,000 MW to meet the project demand, the 16th Electric Power Survey said.

The power demand would grow at an average rate of 6.3 per cent per annum compounded during the period 2001-17, the Northern and North-Eastern Regions would grow at rates higher than the national average, the report said.

The energy requirement by the year 2016-17 in the Northern region would be 4,29,480 MW and the peak load demand would be 69,178 MW, the survey said. Back

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