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

Synopsis of State Reports (Vol.-IV)
Study on `Impact of Restructuring of SEBs’
management units, improvements in management and cost control will be a lot
easier and more feasible. No doubt, the Board will not be able to escape from its
obligation to supply free power to farmers in the near future. It is also clear that it
is not going to get adequate compensation for this burden either. The only option
for the Board therefore is to focus on efficiency gains from within.
Profit Centre concept was relevant five years back, but will not serve any
purpose now. With globalisation and the sustained growth of the economy, rapid
power sector reform is a must so that our industries get the benefit of cheaper
power like our competitors in other countries. The skewed tariff structure needs
to be corrected and cross-subsidy eliminated over a period. The first step in this
effort is to have a restructured Utility focussed on efficient functioning. Also, the
present structure of TNEB is really unwieldy with about 79,000 employees
spread over the entire State. Restructuring will certainly lead to a competitive
environment in which performance of restructured units could be more
accurately measured, making them more responsible and accountable.
The first step that the TNEB should take is to restructure itself into a
transmission, generation, and at least three distribution Utilities, with each
restructured Utility functioning as a separate corporate entity. Three distribution
entities have been recommended, as one will be too large and it will preclude a
competitive environment. A close supervision by the SERC too will be necessary
to realise such gains. By accurately fixing the tariff compensation to the
restructured distribution Utilities, the SERC can hope to unleash the forces of
competition on a level-playing field.
Tamil Nadu has an excellent manufacturing base, and Chennai is emerging as an
important automobile and IT centre. Good quality power at competitive rates is
essential to attract industries to the State. Because of intense competition arising
out of globalisation, industries migrate to areas, which have a sound
infrastructure. Power is a vital infrastructure for investment and also for the
growth and well being of the people of the area, and therefore, TNEB has a
major role to play in the development of the State. For this, the reform process
has to be speeded up. Status quo will lead to lowered efficiency, as is evidenced
by frequent supply interruptions and increased consumer complaints. There is,
therefore, no alternative to taking up reform in right earnest while addressing the
issue of tariff distortion.
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