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

CHAPTER - 4
MADHYA PRADESH
4.1 FACTORS LEADING TO REFORMS AND BACKGROUND OF THE
REFORM PROCESS
Factors Leading to Reforms
Madhya Pradesh had the distinction of being one of the few States, with an
efficient SEB in terms of creating good generation capacity in the State sector,
well-organised network of transmission and sub-transmission system and
having relatively low level of T&D losses. However, the working of the SEB
started deteriorating on account of inefficiencies because of its monolithic
structure, distortions in tariffs, defaults in payment to CPSUs and other
suppliers, increasing gap between demand and supply and high level of
receivables. The State Government was compelled to heavily subsidise its
power sector. As a result, the State’s fiscal resources were severely strained.
The State Government had little option but to go in for the comprehensive
reforms in the power sector.
The process of reform and restructuring was initiated in the State in 1996.
However, it was only in 1998 that the State Government took decisive steps to
bring reforms in the power sector. Memorandum of Understanding (MOU) was
entered into between the Government of Madhya Pradesh and Government of
India on 16 May 2000, wherein the State Government committed itself to a
time-bound reform and restructuring programme of the power sector in the
State. The Government of MP enacted the “Madhya Pradesh Vidyut Sudhar
Adhiniyam, 2000” on 20 February 2001 and was made effective from 3 July
2001.
4.1.1 Reform Act, 2000
The “Madhya Pradesh Vidyut Sudhar Adhiniyam, 2000”, was enacted on 20
February 2001. However, in the meanwhile, in November 2000, the erstwhile
State of Madhya Pradesh was bifurcated into two separate States, i.e., now
existing Madhya Pradesh and the newly created State of Chhattisgarh. After
reorganisation of the State, 33 per cent of the installed generating capacity was
transferred to the State of Chhattisgarh, whereas the level of consumption was
only 21 per cent of the total consumption of undivided Madhya Pradesh. With