India needs sweeping power sector reforms: World Bank

According to World BAnk “Electricity distribution in India needs reform to achieve the target of electricity to all by 2019″. “Power distribution in India needs sweeping reforms if it is to bring back the country to a high growth trajectory and meet its goal of expanding access to electricity to all by 2019,” the Bank said in its report titled “More Power to India: The Challenge of Distribution”

Pointing out that India’s annual per capita power consumption at around 800 units is among the lowest in the world, the World Bank called for more private participation in the distribution. It has identified electricity distribution to the end consumer as the weak link in the sector. The study analyzes the multiple sources of weakness in distribution and identifies the key challenges to improving performance in the short and medium term.

It recommends freeing utilities and regulators from external interference, increasing accountability and enhancing competition in the sector to move it to a higher level of service delivery. “Ominously, the recent sharp increase in private investment and market borrowing means power sector difficulties are more likely to spill over to lenders and affect the broader financial sector”, the report said.

Total accumulated losses in the sector stood at $25 billion in 2011 concentrated among discoms, state electricity Boards (SEBs) and state power departments, the report said. “Revitalising the power sector by improving the performance of distribution utilities, and ensuring that players in the sector are subjected to financial discipline is the need of the hour,” said Onno Ruhl, World Bank country director in India. By tackling the losses through a focused approach, it should be possible to make a marked difference in sector performance, the report added.

Power Minister Piyush Goyal Monday called for increased participation by private companies in power distribution to help ease supply bottlenecks and reinstate investor confidence in the sector. “We will look for more private participation in distribution and would require state support for this task,” Goyal told reporters here after meeting bankers to resolve issues between power sector borrowers and banks. According to a Moody’s report, of all impaired loans at public-sector banks, 20 percent are of distribution companies (discoms), with the proportion going up to 48 percent at some of the most exposed banks. The erstwhile UPA government had approved the restructuring of Rs.190,000 crore debt of state electricity boards in a move to turn around the finances of power distribution companies.

Under the scheme, 50 percent of the short-term outstanding liabilities would be taken over by the state governments and the remainder would be restructured by providing a moratorium on the principal and most favourable repayment terms.

Currently Delhi, Mumbai, Kolkata, Surat and Ahmedabad and the state of Odisha have privately owned discoms.

Source: Business standard.