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

CHAPTER - 2
HARYANA
2.1 FACTORS LEADING TO REFORMS
Haryana adopted the restructuring model, based on a study of its power sector
in 1995-96. The study recommended comprehensive reforms of the electricity
sector in the State. In order to undertake power sector reforms, the State
enacted the Haryana Electricity Reforms Act, 1997. The aims and objectives of
the said Act included the following:
(a) Creating a financially viable electricity sector;
(b) Creating an environment to attract private investment;
(c) Promoting competition; and
(d) Over all development of the electricity sector in an efficient, economical
and competitive manner.
The need for comprehensive reforms was felt since the Haryana State
Electricity Board (HSEB) was finding it increasingly difficult to meet the
demand for power. The State witnessed a peak shortage of 11 per cent and
energy deficit of around 25 per cent in 1997. No generation capacity was added
in the State. Consequently, the State remained increasingly dependent on power
imported from outside sources.
The situation further deteriorated due to lack of adequate funds for expansion
of generation, transmission and distribution systems, as HSEB could not
control the cumulative effect of inefficiencies and mounting commercial losses.
By March 1998, the accumulated financial losses reached Rs 16,076 million.
These continued to grow on account of non-compensatory tariffs, poor revenue
collection and high technical and non-technical losses.
In this background, the State Government initiated the reform process by
restructuring the vertically integrated HSEB. The chronology of events in the
reorganisation process is as follows: