Report of Indian Institute of Public Administration ... - Ministry of Power

GENERAL
MADHYA PRADESH
EXECUTIVE SUMMARY
Madhya Pradesh had the distinction of being one of the few States, which had an
efficient State Electricity Board (SEB). MPSEB has been ranked high amongst the
SEBs, in terms of creating good generation capacity in the State sector, well-organised
network of transmission and sub-transmission system and relatively low level of
Transmission and Distribution (T&D) losses among the SEBs. However, the working
of MPSEB started deteriorating on account of inefficiencies from its monolithic
structure, distortions in tariffs, defaults in payment to Central Public Sector
Undertakings (CPSUs) and other suppliers, increasing gap between demand and
supply and high level of receivables. The State Government was forced to heavily
subsidise MPSEB, which aggravated the fiscal condition of the State Government.
Government of Madhya Pradesh had little option but to go in for the comprehensive
reforms in the power sector.
REFORM ACT, 2000
The Reform Act, “Madhya Pradesh Vidyut Sudhar Adhiniyam, 2000” was enacted on
20 February 2001, but in the meanwhile in November, 2000, the erstwhile State of
Madhya Pradesh was bifurcated into two separate States, i.e., the now existing
Madhya Pradesh and the newly created State of Chhattisgarh. After reorganisation of
the State, 33 per cent of the installed generating capacity was transferred to the State
of Chhattisgarh, whereas the level of consumption was only 21 per cent of the total
consumption of undivided Madhya Pradesh. With limited generation capacity and
large number of agricultural consumers, this division led to an inverted structure of
power sector.
Restructuring of MPSEB
The State Government adopted a reform model for restructuring of MPSEB on
functional basis and it restructured the vertically integrated electricity sector into
separate Utilities. Accordingly, one generation, one transmission and three distribution
companies (DISCOMs) were incorporated in July 2002. In the reform model, a certain
role has been assigned to MPSEB. The new Utilities initially started functioning under
O&M agreement with MPSEB from 1 July 2002. Even when all the five companies
have been made independent companies to conduct their respective business with
effect from 31 May 2005, in this mode, MPSEB will exercise control over the