Press Note dated 29.06.2007

Submitted by admin on Fri, 29/06/2007 - 10:30am

PSEB Engineers’ Association has termed the contention of the report submitted to the Chief Minister as misleading that the present financially distress of the PSEB is due to postponing of Power sector reforms through Unbundling and Corporatisation of PSEB by the state government. The present poor financial position of PSEB is directly due to the wrong and misplaced policies of the Board management and the successive state governments.

PSEB earned a profit of Rs. 118 Crore in 2003-04 but thereafter slipped into losses of more than Rs. 1900 Cr. mainly due non revision of tariff and excessive power purchase at very high rates obviously in view of the Punjab Assembly elections in Feb. 2007. Board made power purchases of more than Rs. 4400 Cr. during 2006-07 although Punjab Regulatory Commission had permitted power purchase of Rs. 2800 Crore only. Now again PSEB is not being allowed to file tariff petition for the revision of tariff for the year 2007-08 due to impending elections of Local bodies.
It is ironical that no written orders either of the state government or of Board management exist on record regarding non filing of tariff petition which was required to be filed by PSEB before regulatory commission in Nov. 2006. PSEB is being pushed towards financial bankruptcy on the mutual understanding of Board management and the state government. This is an illegal act which is being overlooked by the Regulator also who is supposed to be the custodian of Power sector.
With the escalation in all round operational costs on items such as fuel, railway freight, power purchase tariffs, the non-allowance of requisite tariff hike left no other option but to raise loans for meeting operational deficits, leading to a snowballing debt service burden and the classic debt trap position.
The so called “experts” advocating “power sector reforms” possibly have missed out on the basic fact that as far as tariff determination and balancing of revenue with expenditure are concerned, the reforms-mechanism of the PSERC is already in place since 2001 but the problems lies not in the “reforms” but in the non-compliance of Section 61(b) and 65 of the Electricity Act 2003. Having failed to comply with these measures mandated under the Electricity Act 2003, it is not understood what “reforms” are being referred to by the “experts”. The corporatisation/unbundling cannot ensure financial health of the utilities.

The so called experts who are advocating corporatisation/unbundling and privatization of PSEB to improve commercial health & reduce line losses should first study the data circulated in the Chief Secretaries meeting held last month at New Delhi. The unbundled/corporatised Boards like Uttar Pradesh reported a commercial loss of Rs. 3951 Cr., Rajasthan Rs. 1651 Cr. and Haryana Rs. 1688 Cr. during 2005-06.
The line loss of a private company in Orissa has increases from 40.47% in 2001-02 to 45.48% during 2005-06. In one of the private company owned by Reliance in Delhi, the losses even after 5 years of privatization are 48.58%. The line losses in the state owned companies of Haryana even after 8 years of unbundling are above 40% & that of Rajasthan after 7 years of unbundling are above 47%. In one of the companies of UP, the line losses are as high as 56% on the other hand, the line losses in bundled Boards like Punjab are less than 24% & that of Tamil Nadu SEB it is 20.46%. So it is not the structure but the manner in which a utility is managed that ensures efficiency and accountability.
Let it be clearly understood that allowing tariff determination as per the letter and spirit of the Act is the first step to ensure financial health of the power utility. Before contemplating any further “reforms” this starting point of reforms is required to be implemented sincerely. Second most important step for ensuring efficient working of the Power Sector is to grant autonomy to the Board in its day to day working and inject power engineers to manage PSEB, Regulatory commission and power secretariat.

(Er. R.S.Sarao) (Er.H.S.Bedi)
General Secretary President