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Electricity plan: Six states breach deadline

Last updated on: July 13, 2009 11:57 IST

The Union government's six-year initiative to unbundle state electricity boards into separate entities for power generation, transmission, distribution and trading businesses is set to be delayed further, with seven states still to do so, even as the Centre's latest time-limit expired on June 30.

Kerala, Tamil Nadu, Bihar, Jharkhand, Punjab, Himachal Pradesh and Meghalaya are yet to unbundle SEBs. Tamil Nadu has been allowed to unbundle the state utility by December 15, while Punjab has got an extension for another three months.

"The Union ministry of power is considering the requests of Meghalaya, which has asked for six more weeks. Bihar and Jharkhand have also asked for extension of the deadline," said an official from the ministry.

Earlier this year, the ministry had given these states what was being called a final deadline to unbundle their boards. This unbundling is mandated by the Electricity Act of 2003, which prohibits SEBs from functioning as integrated power utilities.

"Nothing is moving on this front. All the states have sought time on one or the other pretext," said another senior official from the ministry of power. Many deadlines have already been breached in the past.

Dismissing the notion that the new deadline was too aggressive for what is essentially a complex political decision, the official said: "They have been getting time since 2003. After the elections, they had around 45 days to act."

The procedure for unbundling of an SEB, as per the Electricity Act, includes the transferring of its rights and liabilities to the state government through a 'transfer scheme', followed by their subsequent transfer to a government company.

Many of the non-complying states have taken the initial steps for unbundling. "Tamil Nadu has already taken a cabinet decision. Bihar and Jharkhand are approaching their cabinet and Kerala has already published a transfer plan," informed the official.

In Jharkhand, however, progress on the government's unbundling initiative is facing a setback owing to opposition from the employees association of the board. "We had gone to the cabinet to get the unbundling approved. But the opposition from the employees association will cause further delay," said a senior official from the state's energy department.

The employees of SEBs have been generally opposed, as they fear it would lead to privatisation and subsequent job losses. There is another reason for opposition. "If each function is given to separate companies, it becomes easy to identify who is losing how much money and where. But in a SEB structure, all accounts remain common for transmission and distribution," said a senior official associated with the Jharkhand SEB.

PFC Consulting has been advising the states in the matter. Both Jharkhand and Kerala are currently considering its report. "We have asked for more time from the ministry. Various departments are giving their opinion on the PFC report submitted to us," said a senior official from the power department in Kerala.

Experts say unbundling has to be accompanied by internal reforms to make it effective. "Unbundling by itself is no solution. It has to be accompanied by good corporate governance. There are examples of states where even after unbundling, the results have not been satisfactory," said a senior analyst from an accounting and consulting firm.

While the government has so far managed to split state electricity boards of 14 states into separate corporatised entities, as per the latest available figures, utilities of only six of these states - West Bengal, Orissa, Maharashtra, Gujarat, Andhra Pradesh and Karnataka -- made profits in 2007-08.

Of the other eight restructured SEBs, six registered losses in 2007-08. These are Assam (Rs 138 crore or Rs 1.38 billion loss), Delhi (Rs 104 cr or Rs 1.04 billion), Haryana (Rs 625 cr or Rs 6.25 billion), Madhya Pradesh (Rs 1,827 cr or Rs 18.27 billion), Uttar Pradesh (Rs 4,512 cr or Rs 45.12 billion) and Uttarakhand (Rs 238 cr or Rs 2.38 billion).

Sudheer Pal Singh in New Delhi