THE government?s promise of another reform-linked mega-bailout for power distribution companies comes even though there is little evidence that such largesse prompts states to mend their ways and restructure the sector.
In July 2008, the Centre had launched the Restructured-Accelerated Power Development and Reform Programme (R-APDRP) scheme to help states finance projects and reduce theft and other ?commercial losses? that undermined the viability of the sector.
The plan was to provide loans of R52,000 crore with the promise of converting them into grants as and when projects were completed. Four years later, just R8,500 crore of R-APDRP funds have been disbursed, as states have failed to ensure that the electricity boards and discoms operate on a commercial basis with freedom to revise tariffs when needed.
Even Power Finance Corporation (PFC), the nodal agency implementing the scheme, conceded that it has so far done ?only basic work? of compiling baseline data relating to aggregate technical and commercial (AT&C) losses. These investments will start showing results only from 2013-14, a PFC official told FE on condition of anonymity.
Earlier this week, on the sidelines of a conference of state power ministers organised by the Planning Commission here, the Union power secretary had said the government was considering a fresh debt recast package for power discoms whose combined debt has reached an unmanageable R2 lakh crore. Analysts see the roots of the crisis in the failure of state governments to undertake necessary reforms so that power distribution becomes a viable business.
The Union power ministry has already prepared a debt-restructuring plan, which would force banks and financial institutions with significant exposure to the power sector to take haircuts.
?Central assistance should be linked to specific action by states so that states that fail to meet targets can be deprived of benefits. But that is not the case with the R-APDRP which has certain implementation gaps,? said former Union power secretary RV Shahi.
?Both carrots and sticks should be used to push states on power reform path,? he added.
R-APDRP has achieved some progress, but there is room for much more, said Seshan Balakrishnan, director, infrastructure advisory services, E&Y.
?The technical definition of the scheme should be relaxed and all areas peripheral to R-APDRP towns (scheme coverage is 1,400 towns), part of contiguous urban habitation, etc, ought to be covered under the scheme. In essence, except for agricultural needs, all power consumption should be covered under the scheme irrespective of municipal limits as currently defined,? Balakrishnan said.
Balakrishnan added that though R-APDRP is comprehensive, addressing preliminary issues consumed a lot of time, leading to staggered disbursement of funds and impeding capital expenditure. Source say PFC has reduced fund estimates for the scheme by around R17,500 crore.
The PFC official, however, added that the scheme has indeed helped reduce AT&C losses in several states. Andhra Pradesh and Karnataka have each reduced its AT&C losses by 1-10% and 2-13%, respectively, in 22 towns by implementing the scheme, Gujarat by 1-10% in 35 towns and Madhya Pradesh 3-11% in 16 towns.