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

State Reports (Vol.-III)
Study on `Impact of Restructuring of SEBs’
(d) High transmission and distribution losses - both technical and commercial;
(e) Non-remunerative tariffs;
(f) Downward trend in industrial consumption and increase in domestic and
agricultural consumption which entailed a high level of cross-subsidy;
(g) Inadequate investment in generation, transmission and distribution sectors;
(h) Widening demand-supply gap;
(i) Inadequate maintenance of the existing generating stations and transmission and
distribution network resulting in low plant load factor (PLF) of generating
stations and poor reliability of transmission and distribution network;
(j) Poor billing and collection;
(k) Poor quality of service to the consumers;
(l) Manpower related problems; and
(m) Misuse of Section 78A of the Electricity (Supply) Act, 1948 which stipulated
that the Government should provide policy directives to the State Electricity
Boards (SEBs).
Under the provisions of the Electricity (Supply) Act, 1948, the State Government had
to ensure three per cent rate of return (ROR) on net fixed assets. OSEB was not able to
achieve the same. The subsidy burden on the State Government increased from Rs
14.00 crore in 1989-90 to Rs 257.62 crore in 1995-96, (the last year of OSEB).
Although OSEB was incurring heavy losses, huge investments were necessary for
creation of additional generating capacity to bridge the demand-supply gap. The State
Government was not in a position to provide the requisite resources to meet the
current as well as future demands of the power sector in the State.
FIRST PHASE OF REFORMS
In November 1993, a decision was taken by the State Government to reform and
restructure the power sector in the State. The restructuring process contemplated the
following actions on an emergent and time-bound basis:
Restructuring By separation of generation, transmission and distribution functions of OSEB.
Private sector Through private sector participation in electricity generation and distribution
participation sectors
Competition Through competitive bidding for new generation projects.
5.2