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

Tamil Nadu
obligations of all the players. This is a national level issue and a consensus decision on
this is vital. The history of consensus decision, however, does not speak well of such
decisions – they were easily breached without much thought. The decision to reduce
the cross subsidy over a fixed timeframe is a case in point. Perhaps, it is time a legal
solution to this issue is found. Otherwise, the objective of having independent tariffsetting
bodies to insulate such decisions from politics will not be achieved.
As regards restructuring, it appears from the reply given by the Board that it is going
back on it. Although at one stage, the Board seriously considered it and did in fact
send a proposal to the State Government, it is now having a rethinking. It is
considering the profit centre concept that has now been recommended by its
consultant M/s CRISIL Infrastructure Advisory, Mumbai. It thus appears that the
Board has no intentions of restructuring and wishes to continue as a monolithic body.
It hopes to achieve efficiency gains by introducing the profit centre concept. It is
possible that the Board had taken this decision because of the employees unions.
The Way Forward
It appears that the thinking of the Board and its employees unions is that the efficiency
gains of reform have already been achieved by the Board and hence there is no need
for restructuring. Obviously, such thinking is flawed; it must be remembered that
further efficiency gains will be all the more difficult and will be possible only by
restructuring the Board. The scope for any further gain lies in reaching higher
technical parameters and sharp cost-cutting through improved management, which
will be difficult in the present structure. Restructuring, however, offers tremendous
scope for further efficiency gains and improvements. With smaller management units,
improvements in management and cost control will be a lot easier and more feasible.
No doubt, the Board will not be able to escape from its main burden of free power to
farmers anytime soon. It is also clear that it is not going to get adequate compensation
for this burden either. The only option for the Board therefore is to focus on efficiency
gains from within. As any further gains are impossible in the present structure, it has
to seriously consider speeding up reform.
Profit centre concept was relevant five years back, but may not serve any purpose
now. With globalisation and the sustained growth of the economy, rapid power sector
reform is a must in order that our industries get the benefit of cheaper power like our
competitors in other countries. The skewed tariff structure needs to be corrected, and
the cross subsidy eliminated over a period. The first step in this effort is to have a
restructured utility focussed on efficient functioning. Also, the present TNEB is really
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