PFC had submitted a Rs 1,125-crore reforms and restructuring package last year. However, the government feels that before accepting the package, the study group should look into the power situation prevailing in the state, the strengths and weaknesses of the MSEB and the interest of the employees.Mantralya sources told The Financial Express that based on the recommendations of the study group, the reform model for the state power sector will be finalised.

PFC has demanded that the government should express its resolve to carry out institutional reforms and prepare a reform-implementation plan with well-defined milestones, formulate and accept the reform-operational and financial action plan, prepareinvestment plan for next five years and identify projects to be financed. The government has acted positively by constituting state electricity regulatory commission.

In addition to this, the MSEB has decided to set up a reforms committee headed by its executive director. This committee will be the nodal point for reforms-related activities.

According to the state government, the areas of concern are lack of operational autonomy as decision-making has been influenced by the government policy, lack of commercial approach, unviable tariff structure, high cross-subsidisation (average high tension industrial tariff is Rs 3.69 per unit), financial losses due to low agriculture tariff, high level of receivables, rising trend in transmission and distribution losses (15.93 per cent in 1994-95 to 17.73 in 1997-98) and constraints in raising resources for required capital expenditure.

Mantralaya sources said that MSEB which owed nearly Rs 977.86 crore to the state government by November 1999, has enough scope forimprovement and over a period of time, subsidies should be reduced.

MSEB's preliminary study on reforms and restructuring envisages confining the board to generation and major transmission. It also wants MSEB to be converted into a company under the Companies Act with a view to attracting private capital and providing access to the capital market. The state government could consider divesting from the new company.