Power reforms still a mixed picture but 3 states show the way

New Delhi, June 18 (UNI) High dependence on subsidy from the state governments in the Northern states of Rajasthan, Haryana and Punjab as well as Maharashtra is a matter of concern, a joint just-released report by Crisil and ICRA shows.

As against a high subsidy of nearly 25 per cent of the total revenues by these states, states like Andhra Pradesh, Gujarat and Karnataka have cut subsidy support -- a key area of power reforms -- to the power utilities considerably, notes the report submitted to the Union Power Ministry.

The two rating agencies, mandated by the Power Finance Corporation Ltd at the instance of the Union Power Ministry, undertook a performance rating of the state power sector across all states and found a mixed picture.

Based on the performance of their power utilities during 2005-06, major improvements were noted in the states of Gujarat, Delhi, West Bengal, Maharashtra, Kerala, Asom, Uttaranchal and Tripura.

While Andhra Pradesh and Karnataka's ratings were stable, a downslide was seen in the states of Tamil Nadu, Chhattisgarh, Uttar Pradesh and Haryana.

The report warns that policy pronouncements of free power announced in certain states may result in continuing dependence on subsidy support, a step which is widely viewed with concern.

Barring the states of Goa, West Bengal and Chhattisgarh, the states in general displayed a wide gap between Average Revenue Realised (ARR) and Average Cost of Supply (ACS) without subsidy.

But, a positive trend was already visible.

Driven by increase in efficiency improvements, renegotiation of high cost (Power Purchase Agrements) PPAs and decline in interest costs, most of the top ranking states -- the state power utilities of Andhra Pradesh, Gujarat and Delhi -- had been able to keep control on the ACS, notwithstanding the steep increase in fuel costs that took place during the past two years.

MORE UNI SD CS BD1242