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BY INCREASING THE budgetary allocation to Rs 3,500 crore for 2002-03, from Rs 1,500 crore this year, and re-designating it as the Accelerated Power Development and Reform Programme, the Finance Minister has clearly put the onus on the States to reform their power sector. The message is loud and clear: Funds are available and can be accessed, provided there is a willingness for reforms. Earlier called the Accelerated Power Development Programme, it is meant to prod the States to carry forward the process of reforms with clearly established milestones with funds being made available as additional Central Plan assistance. A number of States signed MoUs with the Centre to access funds from the APDP for renovation and modernisation of power plants and life extension programmes, uprating of old power plants, and upgrading the transmission and distribution network. That these MoUs came to nothing is evident from the fact that a so-called progressive State like Tamil Nadu, which committed itself to making the electricity regulatory commission operational by January 31, has failed to do so. Mere signing of MoUs is not enough; States must really be committed to what they sign.

Havingsaid that, the APDRP itself needs to be restructured. In its present form, it suffers from problems of ownership and incentivisation. There is now no incentive for line workers of the State power utilities to either carry out 100 per cent metering or improve the transmission and distribution network. Moreover, with most State electricity boards headed by bureaucrats, their tenure itself is most often in doubt. Therefore, there is need for the APDRP to be converted into a fund that would offer assistance wherever the private sector is involved. For instance, all the components of a 100 per cent metering programme could be parcelled out to the private sector, and incentives given as part of the APDRP for achieving these targets. This is not possible in an SEB set up. The SEBs, or their successor entities, can be good policemen overseeing the projects being executed by somebody else. A portion of the funds from the APDRP is to be made available for technical studies on the grid. This should include consultants from the private sector too rather than being confined to those in the public sector. Roping in private sector consultants could also result in funds from multi-lateral agencies being available to the Power Ministry at much lower rates of interest, which again could be channelled on commercial terms to the States.

Theproblem with power sector reforms is not in knowing what to do — almost all concerned know what needs to be done. The problem is how to do it. Dangling carrots to the States in the form of Central assistance alone is not enough. It is in being able to provide incentives that the success of reforms lies. Unfortunately, that is not possible in an SEB kind of set up, which makes it all the more necessary to involve the private sector in larger measure. In its present form, the APDRP will no doubt be successful, but only to a limited extent. For greater good of the power sector, it must be restructured.

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