Monday, September 22, 2008

Kerala plans partial restructuring of power sector

At long last, the day of reckoning has come for the Kerala State Electricity Board. The State government, which procrastinated for nearly five years, is now left with just a few days to restructure the KSEB.

All work connected with power generation and supply has been a State monopoly in most parts of India. Like most State businesses, the electricity undertakings were inefficient. As the Indian government embarked upon economic liberalization, it felt a need to reform the power structure, allowing the private sector also a role.

The Central Electricity Act, enacted by Parliament in 2003, required all State governments to establish separate companies to undertake generation, transmission and distribution of power. It set June 9, 2004 as the deadline for unbundling of the electricity boards.

In many States, organizations of officers and other employees opposed trifurcation. This made it difficult for the governments to move speedily in the matter. They sought more time from the Centre comply with the law.

The Centre obliged, and most of the States eventually fell in line.

In Kerala, the Congress-led United Democratic Front was in office when the Central law came into force. It sought and obtained four extensions of the deadline. It left office without taking any steps to comply with the law.

The Left Democratic Front government, which came to power in 2006, adopted the same strategy as the UDF. It, too, sought and obtained four extensions.

The Communist Party of India (Marxist), which heads the LDF, is opposed to privatisation of KSEB on ideological grounds. So is the CPI. Although the Congress does not share their ideological compulsions, it too does not favour changes of the kind envisaged by the Central law.

KSEB has a plethora of trade unions and associations, all which are under the control of political parties. The Congress-led unions shared the Left unions, enthusiasm to retain KSEB in the present form.

When Central minister Sushil Kumar Shinde granted State minister AK Balan’s fourth request for more time to comply with the law six months ago, he made it clear that there would be no more extension. However, the State did not take the warning seriously.

A few days ago the State government sought another extension. The Centre turned down the request and asked it to comply with the law by September 24. Peeved by the Centre’s action, the State Cabinet decided on a formal protest.

The State’s failure to fall in line even after the deadline was extended eight times exposes it to the possibility of denial of access to power from outside to meet the shortfall in its requirements.

KSEB has 9.16 million consumers, of whom 7.2 million are domestic consumers. Commercial consumers number 1.36 million. There are fewer than 449,000 agricultural consumers and 131,000 industrial consumers.

It has an installed capacity of 2087.23 MW of power. It gets 570.016 MW from the National Thermal Power Corporation. Two private sector firms also make small contributions to the grid. Since local production accounts for only half of the State’s current requirements, lack of access to outside sources can precipitate a major crisis.

The Centre believes reforms in the power sector are necessary to technical and commercial efficiency. It also feels fresh capital is needed to augment capacity for power generation. It considers unbundling of KSEB and the creation of separate companies to look after generation, transmission and distribution essential to ensure efficiency.

The Kerala Electricity Board Engineers Association disputes the Centre’s position. It claims the experience of the States which have already undertaken reforms is that unbundling and privatization do not yield the expected results. It says restructuring has been followed by hefty hikes in the power tariff.

There appears to be no clear link between reform and rate revision. Even though there has been no reform in Kerala, there was a major tariff hike. The Electricity Regulatory Authority is now considering KSEB’s plea for a further revision of rates.

The politically controlled unions’ adamant stand against structural reforms has resulted in a situation where the consumer has to pay higher tariff for an inefficient service. In the last few days, the State has been experiencing unannounced power cuts.

The State government is trying to buy peace by transferring all KSEB activities to a company that will be fully owned by it. This means there will be no unbundling. It remains to be seen whether the Centre will be satisfied with such partial compliance.--Gulf Today, Sharjah, September 22, 2008.


clash said...

This kind of circumspect attitude towards liberalisation of key sectors is not very welcome. While we all go up in arms about the inefficiency and rampant corruption of KSEB, we are one of those few states which employ an half hour power cut in the night to stabilize the distribution in the summer and that is peanuts compared to what happens in the neigbouring state where already this restructring has happened - karnataka. Power cuts marr the outskirts and in some parts of the city and it is not half an hour, they go on for around 12 hours in the day time.
I have been to orrisa one of the few states that went ahead liberalising its power system, and after the cyclone areas were never attended to for around 6 months. some of our prestigous companies were also involved in sharing a pie of that liberalisation.
This is no way arguing for the KSEB, the sluggish customer service and so on. Now the heat is on, this is a forewarning for all sluggish publice sectors.

Shahnas said...

I second clashes arguement. I have worked in the electricity sector in China, KSA, India and Australia. In terms of use of electrical appliances, standard of living and PAYING for electricty , Kerala compares at least to some extend with the developed cities and countries of the world, but ....look at the deplorable service levels and despisable attitude of its employees. Half an hour pre-declared power cuts, hours of undeclared power cuts, poor safety history, whole power stations washed away due to poor maintenance, no money even to desilt the main hydel power reservoir even in decades, no major power station in probably a decade, highest industrial tariff, shocking incidents of electrocution and the like....

I remember when i was in 10th standard and the fuse on the electric post used to regulary blow up every night, and calls (walking a kilometer to the nearest booth), never used to produce any repsonse, nearby resiednts used to climb posts to set it right- that is as lawless as it can get. And then repair times - hours. Maybe the "melalars" and "ministers" have no reason to complain, they get power 24X7, even at the cost of the rural people and the poor sections who doesnt have the resources to agitate. It is luxury if a poor man gets 24 hr electric supply to run his pump sets or light his home or use a fan in the humid climate....this is democrazy..the unions are mum on any service improvement... they are more botherd with whether to use Linux or windows and how to prevant microsoft....common man ...please we will attend u if we get time...and what great propoganda against a rule which intends to infuse competition and accountability into a service which is accessed 24X7 by ppl and is considered a cornerstone for any development. This is brainwash by the employee associations and the government which are so indebted to them for reasons known..

Salsan Jose said...

if you can please post usage statistics of electricity in kerala.

conficker worm