The commercial losses of the state electricity boards (SEBs), on account of these hidden subsidies for the agricultural and domestic sector, have been projected at Rs 13,476 crore by 1999-2000 and Rs 13,807.9 crore by the end of the current financial year.

As per the Survey, even if the proposed national minimum agricultural tariff of 50 paise/kwh is implemented, it would leave uncovered a substantial portion of the subsidy provided to the sector. On implementing a 50 paise per unit charge on agriculture and irrigation, a mere sum of Rs 2670.8 crore and Rs 2669.7 crore would be mobilised during 1998-99 and 1999-2000 respectively.

This, as per the Survey, still leaves the uncovered subsidy figures during 1998-99 at Rs 13,046 crore and Rs 15,250.9 crore by 1999-2000.According to the Survey, the managerial and financialinefficiencies in state sector utilities have adversly affected capacity addition and system improvement in the states. While the state electricity boardss do not have enough resources to finance future programmes, they are also unable to raise investible funds from alternative sources due to their financial and commercial performance.

Moreover, the inability of SEBs to pay their dues, in full, to central power utilities has adversely affected the finances and investment plans of these Central public sector units, says the Survey.

Whereas, under Section 50 of the electricity supply act, 1948, SEBs are required to achieve a rate of return (RoR) of not less than three per cent of their fixed assets in service, the RoR figure as per the survey for 1997-98 stands at negative 19.4 per cent and is expected to be negative 21.2 per cent by the current financial year and a negative 18.5 per cent by 1999-2000.

However, according to the survey, if all the states are able to achieve the stipulated RoR of three percent, sufficient additional revenue can be mobilised which along with the revenue from agriculture tariff can take care of a substantial portion of the hidden subsidies.

Revenue generation on account of a three per cent RoR is estimated to be Rs 16,224 crore during 1998-99 and Rs 15,667.7 crore by 1999-2000. This along with the revenue generation from levying agricultural tariffs can substantially reduce the projected subsidy burden.

High transmission and distribution (T&D) losses have been identified as yet another area of concern by the survey. The T&D losses which stood at 22.3 per cent in 1995-96 have increased to 23.4 per cent in 1996-97. These are more than double the international average of less than 10 per cent and needs to be capped. On the capacity addition front, the installed capacity of power generation as on March, 1998 was 89,090 mw and there has been an improvement in the plant load factor (PLF), which is an operational efficiency parameter for the thermal power plants. According to theSurvey, the average PLF in the central public sector undertakings in 1997-98 and during April-November 1998 was appreciably higher than that achieved by the SEBs.

AP powers the way

The Survey has made a special mention of the power sector reforms initiated in Andhra Pradesh. It points out that more than half of the additional capacity being established in AP is from independent power producers. These producers have to finalise financial closures with national and international financiers to secure adequate finance.

Appreciating the efforts of the AP government, the Survey has pointed out that restructuring of APSEB into two entities: one will focus on generation while the other on transmission and distribution. To provide functional autonomy to the two, they will be set up under the Companies Act, with the state government owing 100 per cent equity.

Besides, the state government is setting up an independent regulatory commission to safeguard the interest of the consumers and ensure efficientgeneration and distribution of power. The commission will put in place a tariff structure. This will help reduce cross subsidies in the power sector.