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PADAMJIT sINGH iNTERVIEW DAILY pOST
dPower scenario in the country has undergone a major change with the unbundling of the state electricity boards across the country.
Five distribution companies, popularly known as discoms, of Punjab, Haryana, Rajasthan, Uttar Pradesh and Tamil Nadu have been declared sick and the banks have denied any further loans to these utilities. These five states are in a serious debt trap with situation going from bad to worse.
Padamjit Singh, Chairman, All India Power Engineers Federation (AIPEF), who has been championing the cause of restoring the financial health of power utilities, feels that most utilities resorted to the suicidal practice of taking loans from the banks to meet their operational revenue gap. “Obviously, this short time measure is not sustainable in the long run, and pushes the utility into a debt trap which becomes progressively more vicious and unmanageable,” Singh told Daily Post in an interaction. Here are excerpts:

Has the Electricity Act 2003 succeeded in meeting the laid down objectives?

The Electricity Act, 2003, was enacted with the prime objective to restore the financial health of power sector so that investments are attracted for capacity addition and system development. This measure, however, has failed miserably since the accumulated losses of power utilities or the erstwhile state electricity boards are now over Rs 75,000 crore and these are expected to increase further to Rs 1.15 lakh crore by 2014. Five discoms of Punjab, Haryana, Rajasthan, UP and Tamil Nadu have been declared sick and the banks have denied any further loans to these utilities. These five states are in a serious debt trap with situation going from bad to worse.

What are the main causes of this massive financial mess?

First, that most of the unbundled state electricity boards (SEBs) were not given competent professional managements but captured by the bureaucrats. Second, that political interference increased with the state governments treating power companies worse than the Pubic Works Departments. Third, that the average realisation of revenue per unit was much lower than the average per unit, thereby making the discom lose on every unit supplied.

How have the power utilities functioned under the loss scenario?

Most utilities resorted to the suicidal practice of taking loans from the banks to meet their operational revenue gap. Obviously, this short time measure is not sustainable in the long run. It pushes the utility into a debt trap which becomes progressively more vicious and unmanageable. The financial meltdown occurs when the banks refuse further loans which results in serious defaults even on priority expenses like fuel and power purchase.

What are the consequences of financial crisis in the power sector?

The central and state governments are relying more and more on private sector for a capacity addition. The public sector role is being ignored on the grounds of financial crunch. The 12th five-year plan envisages about 70 per cent capacity addition under private sector while the financial condition of distribution segment is going from bad to worse.

What are the immediate suggestions in the context of Punjab?

First, to reverse the mad rush to private sector power plants through memorandum of understanding (MoU) route and to restore the role of state sector in adding power capacity by taking up one thermal power station in the public sector. Second, is to implement a financial restructuring plan so as to bring Punjab State Power Corporation Limited (PSPCL) out of the debt trap. Third, for Punjab government to own up the responsibility for bringing PSPCL out of the position of imminent financial collapse or melt down, because this situation has arisen primarily due to government policies and political interferences.
‘Public sector power utilities are caught in massive financial mess’
power is the key driver to an economy. today various public sector power utilities IN india are faced with severe financial crisis. PADAMJIT SINGH, PRESIDENT, AIPEF, throws light on the problems ailing the state owned utilities in a conversation with YOGINDRA MOHAN