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

FOREWORD
Electricity is the most versatile form of energy and a strategic input providing a source of
livelihood for various segments of society. The power sector is a prime mover and an
effective engine of economic growth. Sustaining India’s current turbo growth rate requires
massive infusion of investments and predicated and sound policies for efficient power
generation, transmission and distribution. Over the years, the SEBs had played a very vital
and vibrant role in extending the outreach of electricity to even remote corners of the country.
However, by the 1990s, the SEBs were found to be beset with unsustainable inefficiencies,
unviable tariffs, high T&D losses, mounting subsidies, lack of adequate attention to the
distribution segment, sub-optimal performance, wasteful practices and lackadaisical financial
management. All these led to financial fragility of the entire sector.
Due to the uninspiring financial position of the vertically integrated monolithic SEBs, the
power sector was failing to attract the much-needed investments for its development. Power
sector reforms were necessitated to turn around the sector. Orissa was the first State to
restructure its SEB and thereafter, 12 more States followed suit. Enactment of the Electricity
Act, 2003, is doubtless a distinct watershed in the Indian power sector, as it introduced
innovative concepts like power trading, Open Access, Appellate Tribunal, etc., and special
provisions for the rural areas. The Act has made it mandatory for all the States to restructure
their SEBs. Since, by now, sufficient experience was available to gauge the performance of
the restructured Utilities, the Ministry of Power felt it opportune to have the issue revisited
and studied in depth, based on the hindsight and foresight warranted by the emerging
challenges.
With this end in view, MoP entrusted the Indian Institute of Public Administration with the
task of undertaking a comprehensive study on ‘Impact of Restructuring of SEBs’. After
wide consultations, IIPA drafted a team of experts with rich domain knowledge of the
operational dynamics of the power sector. We acknowledge the outstanding work done by
the members of the `Group of Experts’ at all stages of the Study. All of them carried an
incisive State-specific review and helped in drafting of the National Report most diligently
and objectively. All of them generously contributed their time and attention and completed
their task most meticulously and methodically.
The key findings of the Study are:
• Restructuring is a necessary but not a sufficient condition for turnaround of the power
sector. It is important to note that restructuring is only the beginning and not the end of
the process. It must be accompanied by continuous complementary efforts to enhance
efficiency in the sector and improve the quality of service to consumers.
• Strong and sustained political support during all phases of restructuring is the key. Taking
the employees into confidence and enlisting their willing support and strengthening the