Gujarat not favours major reforms in power distribution sector

Gujarat government has decided to avoid going in for any major power reforms in the distribution sector in immediate future.

A senior official participating in the workshop told media, “The state government believes privatization cannot be a panacea for reforms in the distribution sector. Privatization would automatically mean end to subsidized power, currently being given to the farm sector.” He said that it will simultaneously mean an end to cross subsidy, currently being resorted to by providing power at a higher price to the urban, especially industrial, sector. “Even in Ahmedabad and Surat, the private involvement in the power sector has not gone beyond the urban areas”, the official insisted.

 The decision has come even as top consultants, AF Mercados EMI, told a western regional workshop on power distribution reforms on 12-09-2011 in Gandhinagar, that currently all governmental measures in the distribution sector are mostly targeted at technical aspects, and there is little willingness to involve the private players in the same way as was done in power generation and transmission, both in Gujarat and other states.

Gujarat, of course, is not alone in not going for power distribution reforms. A consultant said, “Only three states – Delhi, Maharashtra and Orissa – have so far privatized some part of their distribution business. The distribution utilities are still beset with unviable tariffs, high transmission and distribution (T&D) losses, mounting subsidies, sub-optimal performance, wasteful practices and lackadaisical financial management.” The consultant cited the Electricity Act, 2003, which favoured power trading, open access, introduction of competition and competitive markets.

Indications are that Gujarat government is all set to go in for even higher subsidies to distribute sustained power to the farm sector. “We plan to increase the number of sub-stations, which provide power to farmers. Till now, one transformer would provide power to a dozen farmers, making it impossible to track wastage. But we have decided to place one transformer for every six farmers at government cost. It would mean, doubling the number of transformers in Saurashtra alone from 6,000 to 12,000, costing Rs 1,200 crore over a two-year period”, a senior official said.

While the government believes the technical change would bring down the T&D losses, especially in the western part of Gujarat, from about 23 per cent to the permissible level of 19 per cent, the consultants say this is not enough and from what the emerging economies like Brazil have achieved – a T&D loss of 14-15 per cent.

Praising Gujarat, along with Delhi, West Bengal and Maharashtra, for reaching a stage where their tariffs are reflective of the cost of supply, the consultants, however, say losses to the coffers due to unreformed distribution system would remain high.

According to one estimate, in Gujarat, a reduction in distribution losses would mean a gain of anywhere between Rs 1,200 crore and Rs 1,500 crore.Source- Times of India