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

1 INTRODUCTION
ANDHRA PRADESH
EXECUTIVE SUMMARY
Andhra Pradesh State Electricity Board (APSEB) was one of the largest and
most efficiently run power utilities in the country. The State witnessed
phenomenal growth in the power sector after the formation of the APSEB in
1959.
APSEB was earning three per cent rate of return (ROR) on net fixed assets
consistently till the late 1980s. The financial strain started from 1989-90 and
the situation continued to worsen over the years. By the end of the year 1997-
98, the outstanding dues of APSEB were of the order of Rs 2,600 crore.
Due to the prevailing financial crisis, APSEB was not in a position to raise
funds for its capital investments. The financial institutions started insisting on
restructuring of APSEB as a pre-condition for lending capital support for
investments. Accordingly, the State Government decided to undertake
restructuring of APSEB.
1.1 Restructuring Exercise
A High Level Committee headed by Shri Hiten Bhaya, ex Member, Planning
Commission, recommended the restructuring of the power sector by separating
generation, transmission and distribution functions. The reform initiatives were
started by the Government in April 1997 with the issue of a policy statement
clearly stating the objectives of the reforms and the strategy to be followed to
achieve the same.
1.2 Implementation of Reform Process
The reform and restructuring exercise started in Andhra Pradesh power sector
in June 1997 with the creation of a Reform Cell headed by an officer of the
rank of chief engineer. Officers, both serving and retired, with requisite skills
and experience were inducted into the Reform Cell. Active involvement of the
members of the Board in the reform exercise was evident from the fact that
weekly meetings were held at the Board level to review the progress of reform
activities. The Secretary (Energy), Government of Andhra Pradesh also
participated in these review meetings, where the requisite approvals were also
obtained.