Investment panel for discom power to govt

NEW DELHI: The government may soon land up becoming equal equity partners in state run distribution utilities, if the Centre accepts the recommendations of the Ratan Tata led Investment Commission. In its path-breaking suggestions on distribution sector reforms, the commission has suggested that a new role for the Centre where it would take up management of state discoms with up to 50% equity holding if the latter fails to use central funds judiciously and carry forward distribution reforms.

The Commission would discuss its suggestions with the prime minister���s office (PMO) before inviting state governments to finalise the course of implementing the novel distribution sector reforms programme,��� an official source said.
As per the distribution strategy finalised the by Commission, a new funding package /loan would be provided by the Centre to state electricity boards (SEBs) against a commitment to implement distribution reforms including reducing losses aggregate technical and commercial (AT&C) losses and assured power supply within a period of five years. Any deviation from stated commitments would empower the Centre to convert its loans into equity up to 50% in the state utility with powers to replace its CEO and change the management.

The Centre could also appoint one third directors on the board of the discom against the financial package provided by it, the commission has said.

The Investment commission has argued for a `carrot and stick��� policy for distribution reforms in wake of failures of all the previous programmes of the government. The Accelerated Power development and reforms programme o(APDRP), where Centre provides incentive and grants to state utilities for distribution reforms, has failed to make a mark with AT&C losses remaining at high levels of 30%-40% in several states.

The Commission has suggested that the Centre focus on distribution reform implementation in six states initially : Maharashtra, Gujarat, Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Punjab. These six states together account for more than 60% of power demand and contribute to more than 75% of power shortfall.

The new funding package suggested by the commission could also cover existing central sector schemes like APDRP and Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). The package would be offered only against unbundling of SEBs and operationalisation of State Electricity Regulatory Commissions (SERC). Even the existing distribution reforms programmes mandate these conditions.

The government has already announced introduction of re-modelled APDRP scheme that provides central assistance in the form of loans to SEBs. This would be converted into grants upon states reducing AT&C losses to around 15% level in five years.