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

Madhya Pradesh
in 27 divisions of seven regional headquarter cities (called priority divisions). The
progress made in this direction is slow as compared to the States like Andhra Pradesh,
Karnataka and Maharashtra.
Structural Issues
The State support for the reform process has been positive. But in the interest of the
reform process moving forward, there are some structural issues and the role of the
MPSEB for cash management of utilities that would need to be addressed.
Considering the changing market scenario of Open Access, intra-State ABT and
competitive power procurement, the Utilities would require functional as well as
financial autonomy.
FRP and CFM
The State Government ownership for the reform is demonstrated by the FRP, which
stipulates the total transition cost involved for the power sector in the State. For the
DISCOMs, the State financial support is provided to the tune of Rs 6,881 crore. The
role of the MPSEB has some advantages. However, in actual practice it amounts to
concentration of decision-making with MPSEB in several areas, which are normally in
the jurisdiction of the DISCOMs. Since MPSEB is not a licensee now and therefore
not answerable to the MPERC, there is a likelihood of conflict with the objectives and
spirit of the EA, 2003. The objectives of the cash flow mechanism (CFM) and the
Financial Restructuring Plan (FRP) could be achieved through a holistic approach,
which guarantees prior consultation with the MPERC and control and responsibilities
on the DISCOMs for implementation of the FRP targets.
The FRP has been revised to cover the period from 2006-07 to 2012-13. The FRP
provides for the reduction of AT&C losses from 50 to 32.5 per cent in a seven-year
period, i.e., around 2 per cent on a yearly basis, which appears to be low. It also
provides financial support to the utilities for the revenue foregone for concessional
tariffs and also for meeting the operational deficit to the Utilities.
Key Areas for Support by State Government
Functional autonomy for the restructured Utilities may have to be defined within the
framework of the reform model adopted by the State Government to make the Utilities
more accountable. Equally important is the effectiveness of the Commission by giving
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