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Reforming power! Regulatory commissions soon

Union Power Minister P R Kumaramangalam has taken up the gauntlet of reforming the power sector with gusto. He announced yesterday that central and state electricity regulatory commissions will be set up within three months. The commissions will be independent quasi-judicial authorities with the right to fix tariff for both the producers and consumers, and deal with all tariff-related matters in generation, distribution, and transmission.

Speaking at press conference in New Delhi, the minister said that a bill to the effect will be introduced in the Budget, whose presentation is expected on June 1. However, an ordinance to set up the commissions has already been issued.

Announcing another tough measure, Kumaramangalam declared that henceforth, state electricity boards would not be supplied power by the central generating units until they opened a letter of credit for buying the power. Moreover, the boards would have a maximum of 60 days to settle their dues, failing which their power would be cut off.

He has also announced that in all sectors save agriculture, subsidies will be limited to only 50 per cent. The minister, however, added that after three years, the 50 per cent limit would also apply to the agriculture sector. One of the major culprits for the virtual bankruptcy of most state electricity boards is due to the massive subsidies given out. For instance, in 1996-97, power subsidies cost the government a huge Rs 220 billion!

The minister said that both the central and state electricity commissions will be guided by the objectives of promoting efficiency and competition in the industry. The central commission would not just fix rates but also act as an advisory unit on aspects of planning.

The government has also prepared a policy to enable states to directly finalise foreign direct investments in power projects up to Rs 15 billion. This amount is needed for projects of 1000 megawatts.

Kumaramangalam stated that he had sought Rs 2.75 billion to Rs 3 billion for the renovation and modernisation of power plants. He has also asked for an additional Rs 12 billion for power transmission projects.