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

CHAPTER - 7
UTTAR PRADESH
7.1 FACTORS LEADING TO REFORMS
Power serves as a vial input for economic development of the State. It is,
therefore, imperative that the sector remains financially viable and
commercially sustainable at all times. Uttar Pradesh, one of the largest States in
the country, is well endowed with natural resources. The State has, however,
lagged behind in economic development. Lack of quality and reliable power at
competitive rates to commercial and industrial consumers to meet their
growing needs is one of the key factors hampering its economic development
during the last two decades. The vertically integrated Uttar Pradesh State
Electricity Board (UPSEB) had been managing all the three functions of
generation, transmission and distribution in the State. UPSEB was facing
problems like:
• Poor energy accounting systems;
• High technical and commercial losses;
• High proportion of unmetered consumption;
• Inadequate cost coverage through tariffs; and
• Undue interference in determination of tariff by the Government.
The poor operating practices prevailing in UPSEB consistently eroded its net
worth, leading to inadequate capacity addition in generation and poor
maintenance of transmission and distribution (T&D) infrastructure. The tariffs
for commercial and industrial consumers were heavily subsidising the
consumption of domestic and agricultural consumers and reached unsustainable
levels. This was resulting in poor growth in the consumption of subsidising
categories while the consumption in the subsidised categories was increasing at
a rapid pace. This led to consistent deterioration of financial condition of
UPSEB through the 1980s and early 1990s. This needed massive financial
support from the Government and appropriate interventions for its operations.
During the late 1990s, the State Government initiated the process of power
sector reforms in the State.