Various Problems of State Electricity Boards in India

Power development during the last 60 years has been significant but still India has faced chronic power shortage. The key reasons behind power shortage include – rising demand not matched with production; dependency of Hydel power on monsoon; delay in commissioning of new capacity in coal in thermal and nuclear plants; non-availability of coal, issues in new power plants and so on.

The main problem area in the power sector is the poor performance of the State Electricity Boards (SEBs). They cite two types of losses for their poor performance viz. T&D losses and AT&C losses.

Transmission & Distribution (T&D) Losses

These losses are due to inefficiency in transmission including theft. A substantial part of theft is attributed to the agriculture sector. This concept is now replaced with AT&C losses.

Aggregate technical and commercial (AT&C) losses

This refers to difference between total units feds into the distribution and the total units for which payment was collected. The T&D losses did not account the loss due to non-realization of the payment. TheAT&C loss captures technical as well as commercial losses and is true indicator of total losses to the SEBs.

Reasons of AT&C Losses

The key reasons to AT&C losses include Power theft, non-billing, incorrect billing, inefficiency in collection of payments, leakage in transmission and lack of investment in upgrading the transmission infrastructure. Due to these problems, most state electricity boards have become unviable and unprofitable. The seriousness of the problem may be gauged with the fact that all India AT&C losses are around 27% (in early 2000s, these losses were around 38%).

Such a high percentage of loss have plagued the financial health of the electricity boards. Due to political pressure and a huge agricultural lobby in all states, they are not able to upwardly revise the tariffs. Many of these SEBs were not able to service their debts and this led to rising NPA, ringing alarm bells in banking sector.

APDRP Programme

To strengthen the Transmission and Distribution network and reduce the AT&C losses, government had launched an scheme called Accelerated Power Development & Reform Programme (APDRP) in 2001. The objective of this scheme was to bring down the AT&C losses to below 15% in urban areas in five years. Under this scheme, the central government provided grants to upgrade the T&D network. But, the inability to use the grants doomed this scheme. subsequently, the scheme was restructured and re-launched in 2008 as Restructured APDRP (R-APDRP). The restructured scheme was broken into two parts viz. Part A and Part B. Under Part A, financial assistance was provided to prepare baseline data using new technologies, while under Part-B, the central government provided support for renovation, modernization and strengthening of 11 kV level Substations, Transformers/Transformer Centres etc.  The states were asked to constitute State Electricity Regulatory Commission and achieve the target of AT&C loss reduction at 3% per year to continue receiving assistance under this scheme. The scheme was launched with a lot of fanfare and optimism, but it could live up to the hype and euphoria. The first thing was that the project moved at snail’s pace. The SERCs were floated, IT companies joined the bandwagon, bids, tendering and re-tendering were all around. Pilot towns were announced. A new crop of IT consultants, GIS Consultants and Billing Consultants came up. When the dust sat down, we find that the AT&C losses were still high. The objective was to reduce the AT&C (aggregate technical and commercial) losses from the current level of over 30 per cent to less than 15 per cent over next five years, by automating and integrating IT. This Herculean task remains undone even today.

Then, the NTPC and PGCIL were entrusted with the task of imparting consultancy to the aspiring DISCOMS. Both the organization were novice in the field of distribution of electricity, having no exposure to the complexity of distribution network and working of distribution units with no knowledge of constrains and problems of Discoms. APDRP could not achieve the desired goals within the stipulated time.

V.K. Shunglu Committee & Chaturvedi Panel

In 2010, this panel was constituted to look if there is elephant in the room. It was mandated to look into financial problems of the SEBs/distribution utilities and to identify potential corrective steps. What came out in the form of recommendations was that SEBs should be able to raise tariffs; upgradation and computerisation of system; distribution franchisee model etc. For debts of SEBs it recommended that a SPV (Special Purpose Vehicle) should be established to buy the bank loans of discoms, whose chairman should be appointed by RBI and RBI should provide a line of credit to SPV for buying the bad loans. But RBI did not even respond on this recommendation☺

The Shunglu committee report did not have many practical suggestions, so another BK Chaturvedi committee was established in 2012. This panel came up with a plant that government should absorb half of the loans of the SEBs and convert it into state government bonds. Remaining half should be restructured by the RBI and a moratorium on interest payment should be put in place. With this, the central government announced a bailout package worth Rs. 1.90 Lakh Crore in 2012. Under this plan, 50 per cent of the short-term outstanding liabilities of discoms was to be taken over by state governments. Rest 50 per cent loans would be restructured by providing moratorium on principle and best possible terms for repayments. The package was to provide immediate relief to discoms.

But the problem is that such packages don’t provide long term relief. The key to problem of SEBs is theft of electricity and until and unless they are able to address that issue, no government package can be sustainable. Such a package was provided in 2001-02 also but then still the SEBs defaulted on payment to NTPC and NHPC for power purchased from them. All states continue to drag their feet without learning lessons from past.

Current Status

Tackling the problem of AT&C losses and reviving the SEBs in India is a mammoth task which cannot be done mere by change in government at the centre.  UPA government was replaced by NDA but the AT&C losses are still standing at 27% in Rajasthan, 48% in Bihar and 34% in Haryana and within this range in many other states. We note here that during 2012-13, power distribution companies selling directly to consumers were making profits in only six states viz. Delhi, Punjab, Kerala, West Bengal, Gujarat and Sikkim.

The NDA government quickly came up its Integrated Power Development Scheme. This scheme was basically to  help states to achieve the AT&C target by strengthening transmission lines and distribution networks, separating feeders, greater metering, and IT-enabling the entire system.