AIPEF opposes mandatory conditions for bailout package

AIPEF opposes mandatory conditions for bailout package
V K Gupta
01 November, 2012The
bailout package for state sector Discoms will not be successful through privatisation of power sector. The AT&C losses can be reduced departmentally if government has will power.
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THE ALL India Power Engineers Federation (AIPEF) has opposed the mandatory conditions linked to bailout package for power sector and has suggested that transmission losses should be reduced departmentally as has been demonstrated in many states.

Federal executive committee of AIPEF in its meeting held at New Delhi discussed threadbare the Government of India’s recent order for financial restructuring of the state’s distribution companies.

Padamjit Singh chairman, AIPEF,said that the proposed financial restructuring neither addresses the causes of persistent ill health of the power supply industry nor does it seek to remedy the ailment. The restructuring is aimed at securitization the huge losses of the power supply industry and transfer them into bonds which at a later stage could be sold into the international debt market. This would only result in the transfer of huge assets build in the last decade to private and multinational sector for a pittance.
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Shaliender Dubey, Secretary Genera, AIPEF, said that the recent order of the Government of India for financial restructuring of the states distribution companies is a clear declaration of the failure of the decade old reforms. As per order “the reasons for the present situation in the power industry are non-revision of tariff, non-payment of subsidies, high distribution losses and high cost of power purchased”. The list of causes for power financial help has remained the same except as was before the reforms. The only addition is the high cost of power caused by the privatization of the power supply industry

K Ashok Rao, Advisor, AIPEF, said that while the restructuring requires the state governments and the Electricity Boards to be responsible for the running of the utilities, the Government of India has as a condition of restructuring enforced franchising. This is not just contradictory, but would result in privatizing profits and nationalizing losses since the regulatory system is not only weak but is politically and bureaucratically controlled resulting in the regulator being regulated by the regulated. The consequences would be spiraling of losses and serious damage to agriculture and small enterprises.

Padamjit Singh alleged that unlike in the past, where comprehensive fuel - energy policies were formulated for the country and plans in the entire energy industry was based on that today the policy is formulated and modified to suit investor requirements. The consequence is acute shortfall in coal and natural gas and unrealistic and dangerous plans for nuclear energy.

AIPEF demands that a high powered committee with a representative from federation be constituted to evaluate the consequences of the decade of reforms and changed legislation till that time no further action should be taken.

An unambiguous statement from government of India on what would be done with the accumulated losses that are currently being securitized into debt bonds since it is more than obvious that neither the State Governments nor the State Electricity Boards can ever redeem these bonds.

The AT& C losses have been reduced in Punjab, Eastern Andhra and urban Karnataka by the power sector engineers and their expertise and suggestions should be followed everywhere to achieve reduction in line losses. Franchisee or privatization is no answer for reducing the losses.