Financial Daily from THE HINDU group of publications
Thursday, Jan 31, 2002
Industry & Economy
Focus on power reforms at revenue circle level
BANGALORE, Jan. 30
THE Union Ministry of Power has rephased its power sector reforms and has now begun focusing on overhauling distribution at the revenue circle levels.
The Union Minister of Power, Mr Suresh Prabhu, told newspersons here today that 63 circles had been chosen for this kind of intervention. The two public sector entities - National Thermal Power Corporation Ltd and National Hydroelectric Power Corporation Ltd - have been appointed consultants for the exercise, he said.
Overhaul of these circles is expected to be over within a year, after which the reforms would be extended to the remaining 340-odd circles in the country.
This approach is intended to cut distribution losses, which currently cost all the State utilities at least Rs 55,000 crore each year. Mr Prabhu said that the "bottom up'' approach would lead to at least 15 per cent reduction in distribution losses.
The revenue impact would be to the extent of at least Rs 35,000 crore each year. Consultants would be entrusted with the task of preparing "base line information'' on these revenue circles. Such information would quantify the actual losses.
This move was adopted after the Power Ministry realised that the figures of losses were considerably higher than what was being declared by the State Governments and their respective utilities. The reports generated by the consultants would be bankable documents, based on which distribution circles could be taken up for privatisation, the Minister added. "Absence of this kind of authentic information is the major hindrance for distribution privatisation.''
Referring to the Rs 41,000-crore dues, the proposed one-time settlement would be taken to the Union Cabinet before the Budget session. In this settlement, a portion of surcharge owed by the utilities to Central generating companies would be written off. This amount has been estimated at about Rs 10,000 crore.
The remaining amount is to be securitised and bonds issued by the State utilities, which would be sovereign guaranteed. The exact structure - tenor and coupon rates for these securitised instruments - has not been finalised. However, these instruments are expected to be priced close to existing sovereign debt paper.
Mr Prabhu said that the Power Ministry has also mooted proposals for the recurrence of such large dues. This would involve entering into separate agreements with the States which would allow the Central utilities to recover dues from the Central devolution funds.
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