Shunglu Panel: Reform power sector and regulators effectiveness

V K Gupta

22 December, 2011

The Shunglu Panel in its 111-page report has claimed that reforms started in 2003, but has not been effective so there is need for further reforms in the power sector. 0

THE SHUNGLU Panel has recommended that power sector reforms in general and effectiveness of state Regulatory Commissions in particular should be assigned priority. The report claimed that the Electricity Act 2003 envisaged the separation of generation, transmission and distribution for reforms in power sector. Though there is separation of three works in most of the state electricity boards but the same is not in substance. The ownership, maintenance financial wellbeing are so interlinked that it cannot be said separate in any real sense of word. Second set of reforms in the form of open access in its broadest sense remains a dead letter. Moreover, emergence of truly autonomous SLDC s is at best in its infancy.

Share To bring out the distribution companies from their financial problems, the panel has proposed that a special purpose vehicle (SPV) should be set up as a corporate entity entitled to purchase loans of banks where public sector banks believe it needs to redefine its portfolio. Banks will discuss revised repayment schedule with concerned state.

SPV will take the pending loans only if concerned state agrees to regular tariff increase, policy of planned franchising of distribution function. Further, the state would give an undertaking that amount defaulted would be debited to their account. The franchisee system would be introduced in at least 455 cities of the country which consumes 40% of power. The franchisee can take away assets created during the period on expiry of licensee period.

The report suggests power regulators should play a major role in the financial stability of restructured Discoms as advised by Appellate Tribunal on Electricity last month. Regulators must ensure that entire validated costs of distribution companies get recovered. Regulators would allow distribution companies to pass on the entire burden to consumers to help them come out of annual losses.

The report on financial health of utilities states the total state government loans on utilities are 24079 crore and other loans are Rs.1,60,662 crore. The liabilities of utilities are Rs. 1,53,356 crore.

The Chairman of Discoms should have tenure of 3 to 5 years. He can be a professional or exclusive IAS and his tenure cannot be shortened. Two non-executive independent directors from power sector shall also be thereon Discoms board.

Discoms will have to undertake capital expenditure as a first priority which will yield additional income. The panel has recommended that R-APDRP scheme should be extended in next plan and should cover towns with population of 30000 and above as per census 2011. Electronic meters and pre-paid meters be installed. All consumers, and even BPL families should be billed. The minimum agriculture tariff should be 50 paise per unit and 8 hours power supply every day should be ensured.