Implement Power Distribution Reform Incentive Package for States

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New Delhi, Jul 6 (UNI) To bridge power shortages plaguing the country, the Investment Commission has called upon the Central Government to undertake a 'Distribution Reform Incentive Package' with regard to the States which takes recourse to adoption of a 'carrot and stick policy'.

It suggests incentives for distribution reforms and stiff penalties for non-compliance.

The Investment Commission, headed by eminent industrialist Ratan Tata, has submitted its Reports to Finance Minister P Chidambaram, indicating the thrust areas for the country's development.

The Reports pertain to various sectors and are to be discussed at the highest level, including the Prime Minister's Office, and are being looked into by the ministries concerned.

The power sector report asks the Government of India (GoI) to focus initially on distribution reforms in six States.

These are Maharashtra, Gujarat, Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Punjab.

These States together account for more than 60 per cent of power demand and contribute to more than 75 per cent power shortfall.

The Commission enjoins upon the Government to negotiate a tailor-made distribution reform incentive package with each state.

The actions at Central Government level entail no further exemptions being given to any State from the Electricity Act 2003 for provisions and timelines for State Electricity Board (SEB) unbundling and reform.

The minimum condition it suggests for operationalising the Distribution Reform Incentive Package is unbundling of SEBs and setting up of State Electricity Regulatory Commissions.

The Commission says the funding package loan from the Central Government to SEBs should be against a committment to implement distribution reforms.

It suggests that the funding package should also cover existing schemes such as Accelerated Power Development and Reform Programme (APDRP) and Rajiv Gandhi Gramin Vidyutikaran Yojana(RGGVY).

While the former pertails to cities and towns, the latter relates to rural areas.

The Investment Commission has suggested that the Central Government impose certain conditionalities on the package.

These are seeking autonomy and corporatalisation of distcoms with GoI nominees on the Board and appointment of professional managements and CEO's of distcoms.

The GoI would appoint one-third of the Directors on the Board of distcoms against the package provided.

If, however, after accepting the package from GoI, distcoms are unable to meet the loan covenants, then the loan will be converted into equity of GoI up to fifty per cent.

In such a case, GoI would replace the CEO and the management of the company.

The Commission suggests empowering managements with the task of developing and implementing a five year plan of investment and upgradation of T &D infrastructure to reduce losses.

It says the management should encourage franchising and operationalising the Public Private Partnership (PPP) model for select areas.

UNI GS/MP AS1721

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