FE Editorial : Electrifying situation

Even when the government announced its proposal to restructure R1.2 lakh crore of short-term power sector loans last September, it was obvious that expecting a dramatic change in the way the sector operated was going to be more than a bit of a stretch. After all, commercial losses of power utilities had more than quadrupled over the last five years to an estimated R80,000 crore in FY12 despite at least three reform packages in this period. A committee headed by Montek Singh Ahluwalia gave sweeping concessions to state utilities in 2001, the government has had an Accelerated Power Development and Reform Programme (APDRP) and even a Restructured APDRP, and a few billion dollars were also lent out by the World Bank to individual states against a promise for future reforms. Despite this, the average tariff-to-cost ratio for power, which was 82.2% in 1992-93 before falling to 67.8% in 1999-2000, rose to 82.2% in 2006-07 but started falling after that, to around 78% today. So even while the government said it was serious about linking the short-term loan restructuring to reforms—targets were set for reducing the annual gap in tariffs and costs—it’s worth keeping in mind that while the outlays for the APDRP were over R50,000 crore, the actual amount sanctioned has been under R15,000 crore, suggesting states weren’t interested in even moderate reforms.

This time around has been no different and, with states not too keen to accept formal tariff hike commitments, the government has

... contd.