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

Synopsis of State Reports (Vol.-IV)
Study on `Impact of Restructuring of SEBs’
the limited generation assets and high agricultural consumer mix, this division
led to an inverted structure of power sector and consumer mix in the State.
4.1.2 Restructuring of MPSEB
The State Government adopted a reform model for restructuring of the MPSEB
on functional basis. The vertically integrated electricity sector was restructured
into separate Utilities. Accordingly, one generation, one transmission and three
distribution companies were incorporated in July 2002. In the reform model, a
certain role has been assigned to the MPSEB. The new Utilities initially started
functioning under O&M agreement with MPSEB from 1 July 2002. Even
though all the five companies have been made independent entities to conduct
their respective business w.e.f. 31 May 2005, in this model MPSEB will
exercise control over the revenues from business of the five companies, which
shall be utilised in the special mechanism (described in Para 4.1.6.). It has been
indicated that this arrangement is intended to last during the transition period.
4.1.3 State Government Role and Structural Financial Support
The Financial Restructuring Plan (FRP) was prepared by MPSEB and updated
in November 2005. However, this has not been formally approved by the State
Cabinet. The important assumptions used in financial projections were that the
AT&C losses will be reduced from 51.6 per cent in 2004-05 to 32.5 per cent in
2011-12, collection efficiency would increase from 85 per cent to 96 per cent
and capital investments to the tune of Rs 18,825 crore would be made in the
sector during this period. The AT&C loss reduction targets were on a
conservative basis. Also, there shall be a regular year on year increase in the
retail tariff. Implementation of the proposed FRP is expected to turn around
MPSEB by 2011-12. The State Government’s commitment to a total cash
outflow would be approximately Rs 6,881 crore during the seven-year period
of FRP. However, there would be an inflow of around Rs 8,623 crore to the
State Government from MPSEB, resulting in a net outflow of around Rs 1,741
crore to the Government.
4.1.4 Role of MPSEB
The reform model provides for a unique functional role for MPSEB after the
restructuring. MPSEB has transferred all functions including assets of the
erstwhile MPEB vide Madhya Pradesh Electricity Reforms Transfer Scheme
Rules, 2006 to the respective Utilities. It has retained two principal functions,
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