Board Restructuring: Unions’ model, if accepted, will incur heavy losses
Rakesh Lohumi
Tribune News Service

Shimla, September 1
The model suggested by the joint front of employees for restructuring of the state power utility, if implemented, will be an unmitigated financial disaster with the state losing revenue from sale of electricity to the tune of hundreds of crores perpetually.

According to the front’s model, which is under consideration of the government, the provisions of the Electricity Act 2003 are to be complied with without unbundling of the state utility.

The board will be incorporated as a company, carrying all the three functions of generation, transmission and distribution.

Since a transmission company cannot carry out trading of power, the front has suggested that trading should be assigned to a newly created energy directorate or a trading company be set up for the purpose.

However, if the government accepts this model, the entire surplus power available with the board will have to be traded as per norms laid down by the Central Electricity Regulatory Commission (CERC), which has allowed a profit margin of just 4 paise per unit.

A perusal of the data pertaining to the sale of power for the past two years reveals under the proposed model, the board would lose a revenue of over Rs 1,500 crore.

As per the audited accounts, the board sold 1,198 million units of electricity to earn a revenue of Rs 617 crore in 2007-08, whereas the quantum of power sold through an independent trading company would have fetched just Rs 4.80 crore at a margin of 4 paise per unit.

Similarly, last year sale of 1,500 million units yielded Rs 927 crore as against a meagre Rs 6 crore a trading company would have earned. The quantum of loss will increase progressively as more power will be available for sale.

Moreover, the trading company will not have stakes in the sale as it gets a fixed margin of 4 paise per unit, irrespective of the sale rate.

Trading is inbuilt in a distribution company but an unbundled entity cannot carry out trading. The financial loss apart, it will face problems in day-to-day functioning without trading.

The engineers in the board and experts in the state regulatory commission are aware of it, but they are silent as they have not found the government very receptive to sane advice. In fact, the government has been virtually following the dictates of employees’ unions.

There is utter confusion and it seems those at the helm are not clear if the restructuring exercise was being carried out to bring efficiency in the power sector or for the benefit of employees.