APDRP: In Search Of A Purpose

Updated: Jul 27 2002, 05:30am hrs
When the ministry of power launched its Accelerated Power Development Programme with a first year allocation of Rs 1,000 crore, it was hailed as a major initiative of the government of India, next only to the enactment of the Electricity Regulatory Commissions Act (1998). In the first two years, APDP was to finance specific projects relating to renovation and modernisation of old generating plants, and more importantly, the upgrading and strengthening of sub-transmission and distribution network including energy accounting and metering in distribution. States that signed memoranda of understanding with the power ministry for implementing structured power reforms with agreed milestones were to get access to these funds. Projects worth Rs 1994 crore were approved. The APDP portion of Rs 1,009 crore was also sanctioned, but only Rs 163 crore could be actually disbursed due the inability of state electricity boards and their successor distribution companies to draw up appropriate investment plans. So, the power ministry increased the allocation to Rs 1,500 crore to be applied to 63 electricity circles.

NTPC and PGCIL were appointed as advisors-cum-consultants, who took the assistance of several public sector engineering companies like WAPCO, CPRI, NPC and MECON. While these companies are very good in their own fields, none of them have any experience in distribution management. Ultimately, only Rs 426 crore could be disbursed even in year 2002. An expert committee that reviewed the scheme suggested that it should be restructured to a mechanism for supporting power sector reforms in states linked to the fulfillment of certain performance criteria by way of benchmarks. But then, was this not done earlier through MoUs Anyway, on the recommendation of the committee, the government of India in the financial year 2003 budget enhanced the allocation to Rs 3,500 crore, inclusive of the unspent Rs 1,074 crore of FY 2002. The programme was renamed as Accelerated Power Development and Reform Programme or APDRP, armed with the proviso that access of states to the fund would be based on agreed reform programmes, the centerpiece of which would be the narrowing and ultimate elimination of the gap between unit cost of supply and revenue realisation within a specified time period.

The government of India set up yet another committee to reshape APDRP and assist the states to develop state specific reform programmes. Instead of working out at least the outline of a state specific reform programme to examine the practicality of various reform measures, this committee embarked on a search for fresh approaches to reform. The committee is understood to have proposed the following: create a fund into which government allocations will be parked to prevent unspent funds lapsing and to enable the fund to leverage additional funds from international agencies; 50 per cent of the allocated Rs 35,000 crore should be used for projects to improve the distribution system. The investments would be focused on a specific area (circle or industrial/urban agglomeration); 50 per cent of the allocation to be earmarked for providing incentives — an outright grant as a reward for achieving agreed milestones, which would be measured by the distance between average cost of service and average revenue.

The recommendations of the committee do not seem to promote the original objective of making the programme an accelerator of the reform process in states. In fact, the creation of a separate fund keeping large sums of money pre-empted from the budgetary process for convenient drawal at any time by state governments would only give them a sense of complacency. There are different ways of ensuring easy release of funds against expenditure. The most convenient would be to have a system of advance payments to state governments to be used as imprest advance that would be replenished as and when expenditure is incurred and audited. The proposal to leverage the fund to mobilise more funds is highly optimistic. Most international financing and donor agencies have selected specific states and are pursuing high profile reform programmes. Why would these agencies merge their identity with a government sponsored fund

The second recommendation reserving 50 per cent of the fund for distribution system improvement projects is not going to enthuse state governments to accelerate the reform process. The allocation to each state itself is likely to be small relative to needs. Actually, APDRP funds should be allocated exclusively for such investments, which would help in accelerating the reform process. Experience of Orissa and Delhi shows that the reform process gets delayed or even derailed due to lack of information on available assets and loss levels. The critical step is to meter the flow of electricity from 33/11 kV sub-stations along 11 kV feeders up to the point where the number of consumers obtaining electricity will be about 3,000-4,000.

Below 11 kV, the number is in millions and distribution losses are in the 20-40 per cent range. The connected load of consumers actually limits the maximum current that can pass through the 11 kV feeder from the sub-station. By regularly monitoring meter readings of feeders, large-scale thefts, illegal connections could be identified and eliminated. In the MoUs, each state solemnly assured that such meters would be fixed by March, 2002. Very few have fulfilled the promise. But the most depressing aspect is that even the meters fixed are not being read regularly. Therefore, the best application of APDRP funds would be investments in meters and their erection at sub-stations.

The problems of governance in the power sector would be to a great extent remedied if in each state a special distribution monitoring and management cell is set up as part of the load despatch unit. In most states, it is possible to install a Scada system to remotely read feeder meters from the load despatch centre itself. The yearly allocation of APDRP funds to a reforming state should be for projects that are part of a master plan for total modernisation. The suggestion for reserving 50 per cent of APDRP funds for rewarding those entities that successfully narrow the gap between average cost of service and average revenue should be pursued sans encumbering conditions. The first step should be the total elimination of collection inefficiency. Ultimately, a bill is served only on specific consumers, as per rules. Collection must follow or the service should be disconnected. In states where collection efficiency is poor, APDRP incentive should only be given if collection of current bills to the extent of 99 per cent becomes the first reform landmark. Even in its infancy, APDP had a clear objective of linking assistance to achieving reform milestones. Conditionalities and lack of investment focus have greatly hindered the success of the programme as it matured into APDRP. The Deepak Parekh Committee should concentrate on this problem and work out a model state level plan and not go in search of new objectives and new institutions. That would be akin to reinventing the cartwheel.

The author is advisor, Energy Group, Administrative Staff College of India