PSEB Engineers Association strongly opposes the failed model of reforms being suggested by PHD Chamber to Punjab government for the Power Sector of the State. Although Association is for introducing reforms in the power sector to provide reliable supply to consumers at affordable rates but are opposed to the borrowed concepts of unbundling and privatization being the panacea of all the ills of the power sector. These concepts were introduced in the power sector in early 1990’s to attract private investment but failed miserably forcing the central government to support the sector through various schemes.

The overdependence on private sector for capacity addition in the country has already played havoc with the ambitious plans of the central government to bridge demand-supply gap in the country. The 8th, 9th and 10th plans achieved a capacity addition target of only 53.77%, 47.25% and 51.52% respectively mainly due to failure of the private sector which contributed only 8433 MW in 15 years (1992 to 2007) against total capacity addition of 56618 MW in the country. In view of the repeated failure of the private sector to add generating capacity despite grant of all types of incentives, guarantees and counter guarantees, Govt. of India during 11th plan has given a modest target 10760 MW capacity addition to private sector out of a total capacity addition of 78577 MW envisaged by Planning Commission (13.69%).

Punjab’s own experience of private investment in generation for setting up Goindwal Sahib thermal plant through GVK Company should be an eye opener for the votaries of private sector. This project was conceived along with GHTP Lehra-Mohabbat stage II at the same time in early 1990’s. Despite delays, the GHTP stage II has been commissioned but the GVK project is yet to start its work. Despite the failure of private sector in generation, Punjab government has already declared its intention to add 5000 MW of generation in the next 3 to 4 years through private sector, which is not likely to materialize.

Whereas private investment in distribution is concerned, the experience has been dismal. The first state to privatize its entire distribution business was Orissa when all the four companies were handed over to private sector in 1999. At present, the distribution sector in Orissa is in turmoil with the American company (AES) leaving the management of CESCO with unpaid liability of over Rs. 400 Cr. & remaining three companies being managed by BSES (a Reliance company) being served show cause notice for suspension of their distribution license by Orissa State Electricity Regulatory Commission. Various committees including ‘Kaungoo Committees’ set up by Orissa Government and other agencies set up to study the outcome of Orissa model of reforms including World bank have concluded very explicitly that it is a failed model and has proved very costly for the state. Even after 9 years of privatization the line losses are in the range of 40 to 45% in Orissa.

The second experiment of distribution privatization is Delhi where even after 5 years of privatisation, the citizens & the govt. by and large are dissatisfied with the working of private companies with Chief Minister of Delhi even threatening BSES for cancellation of their license. The CAG report on privatization carried in Delhi and a House committee headed by a ruling party MLA has passed serious strictures on the whole exercise. After 5 years of privatisation, line loss in one company in Delhi operating in a highly urbanized area of Delhi is 40% against 22.7% in the whole state of Punjab. Most of the investments made by these private companies are either through Central Schemes like APDRP or through commercial borrowing which has been duly compensated in the tariff being charged from the consumers.

The support of the failed model of reforms by Industrial lobby is natural because If we compare tariff revisions carried out by major states who had unbundled their State Electricity Boards, the %age increase in industrial tariff ranges from (-)3.55 % to 16% during the last 6-7 years whereas domestic tariff in these states during the same period had increased from 67% to 162%.. With the implementation of Electricity Act-2003, the cross-subsidy part is coming down resulting in steep rise in domestic tariff as compared to industrial tariff. With implementation of concepts like open-access, captive generation etc. providing greater opportunity to industrial/bulk supply consumers to opt out from SEBs network in the coming years, the burden on small domestic/rural consumers will increase many fold. The hardest hit would be rural/urban domestic consumers & small industrial consumers.

The policy of handing over creamy urban and industrial areas of the state to private players on franchisee can be summed up as “Privatization of Profits and Nationalization of Losses” because Profitable segment of the business would be handed over to private players thus Privatizing the Profits whereas by retaining the rural and non profitable areas with public utility, the losses would be nationalized

The mounting losses of PSEB is not because of its operational deficiencies but mainly due to wrong policies of State government who is refusing to pay cash subsidy of Rs. 1400 Cr. to PSEB as per Regulatory Commission orders. PSEB Engineers’ Association cautioned the state government against adopting failed model of power sector reforms in Punjab and requests it to consult professionals with experience of the power sector to introduce real reforms.

(Er.R.S.Sarao)	(Er.H.S.Bedi)
General Secretary	Preisdent