(a) whether the Union Government have announced any policy for the
allocation of electricity generated from its new projects by converting the existing
Gadgil formula;
(b) if so, whether some of SEBs are not willing to undertake power reforms;
(c) if so, the details thereof; and
(d) the extent to which the new policy is likely to affect the working of SEBs
and meet the power shortage in the country?
THE MINISTER OF POWER (SHRI SURESH P. PRABHU)
(a) & (d): A Statement is laid on the Table of the House.
STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF
STARRED QUESTION NO. 414 TO BE ANSWERED IN THE LOK SABHA
ON 18.12.2000 REGARDING POLICY ON ALLOCATION OF POWER.
(a): It has been decided by the Government to treat the `Formula` for
allocation of power from Central Sector Generating Stations to the States/UTs as
`Guidelines` for new Central Sector generating stations. The Salient features of the
`Guidelines` are given at Annexure-I.
(b) & (c): The Conference of Chief Ministers and Power Ministers held in New
Delhi on 26.2.2000 discussed various measures for improving viability of State
Electricity Boards including compulsory metering and distribution reforms. The
conclusions arrived at in the Conference are given at Annexure-II. The States of
Orissa, Andhra Pradesh, Uttar Pradesh, Haryana, Karnataka and Rajasthan have
unbundled their State Electricity Boards. Several States have taken a decision to
undertake power sector reforms. 14 States (Orissa, Andhra Pradesh, Uttar Pradesh,
Haryana, Karnataka, Rajasthan, Tamil Nadu, West Bengal, Gujarat, Maharashtra,
Madhya Pradesh, Arunachal Pradesh, Delhi and Punjab) have since
notified/constituted SERCs, with a view to undertake rationalisation of electricity
tariff and to bring about transparency in relation to tariff and subsidies.
As a part of the strategy to give impetus to reforms and restructuring
in the power sector, the Central Government has entered into Memorandum of
Agreement (MOA) with the States of Uttar Pradesh, Karnataka and Madhya
Pradesh, to support their reform efforts.
(d): The `guidelines` would enable reforming states in getting additional
allocation of power from 15% unallocated quota in central sector power stations
and also from new power projects.
Further, better commercial viability and resolutions of the problem of
outstandings of the Central Power generating companies, as a result would enable
them to grow faster and provide economical additional power needed by the
country.
ANNEXURE-I
ANNEXURE REFERRED TO IN REPLY TO PART (a) OF LOK SABHA STARRED
QUESTION NO.414 FOR 18-12-2000 REGARDING POLICY ON ALLOCATION OF
POWER.
SALIENT FEATURES OF THE GUIDELINES
(i) It will not disturb the allocation already made under the `formula`. There will be no
change to the contents of the `formula`.
(ii) Power from the new central sector power stations will be made in Accordance with
`power purchase agreements (PPAs) to be signed between the CPSU and the State/UT or any of
their authorized agency/Board.
(iii) First offer for purchase of power shall be made by the CPSI to each Constituent
(State/UT or their authorised agency) of the region as per their Entitlement.
(iv) In case any constituent of the region does not buy its share or part thereof, the
CPSU shall have the right to sell that power to any other State/UT in accordance with the PPA to
be entered into by them. However, such offer by the CPSU shall first be made to the State(s)/
UT(s) within the region(where power station) is located) before diverting the power to
State(s)/UT(s) outside the region.
(v) Where there are more than one claimants to the surplus power, so offered, weightage
in allocation shall be given to the power sector reforming State(s)/UT(s).
(vi) This does not affect allocation of 10% of the power to the State where the central
thermal power plant is located and the 12% free power from the central Hydel power stations to
the State(s)/UT(s) of the regions (including the State where the hydel project is located).
ANNEXURE-II
ANNEXURE REFERRED TO IN REPLY TO PARTS (b) AND (c) OF STARRED
QUESTION NO.414 TO BE ANSWRED IN THE LOK SABHA ON 18-12-2000
REGARDING POLICY ON ALLOCATION OF POWER.
RESOLUTIONS OF THE CHIEF MINISTERS/POWER MINISTERS CONFERENCE HELD ON 26-02-2000.
The Power Ministers` Conference took note of the impending difficult situation facing
the power supply industry in the country due to continuing decline in commercial viability of the
sector as a whole. It noted the fact that :-
1. Outstanding dues of CPSIs have been increasing and have now reached Rs.23,000 crores.
This trend if maintained would adversely affect their Current operations apart from inhibiting
their future expansion plans.
2. Financial closure for private power projects is becoming increasingly Difficult.
3. The states are unable to finance new projects on their own.
4. Increased in budgetary support from State Governments as well as central
Government for this sector is not feasible due to fiscal deficits.
II. The primary factors responsible for this unsustainable financial situation are :
(i) Theft and pilferage at the macro level are estimated to be over Rs.20,000 crores per
annum.
(ii) Technical losses in transmission & distribution for the country are also too High.
(iii) Large number of the thermal stations in the State sector run at an operational
efficiency of less than 40%.
(iv) The average annual operational losses of the State Power Sector for the country is over
Rs 12,000 crores.
III. It was also recognised that the corss subsidies cannot be sustained if industrial tariffs
make Industry non-competitive in the new environment of increasing globalisation with
elimination of quantitative and other restrictions. It becomes necessary to ensure that Indian
Industry is not handicapped by unsatisfactory power supply or by tariff which makes it non-
competitive,. Further, the consumer, including the farmer has a legitimate claim for
uninterrupted good quality power supply. His willingness to pay reasonable costs is
underestimated.
RESOLUTIONS
1. The Power Ministers` resolved after taking into account all the problems facing the power sector,
that with the intention of achieving commercial viability and providing power at reasonable rate to all,
reform must be undertaken with determination, vigor and a sense of urgency. Delay in reform only
increases the financial cost of reforms, and the burden of liabilities only increases. Reforms must begin to
show results within the next 2-3 years. The key elements of the reform strategy are :-
(a) Energy Audit at all levels.
(b) Time-bound programme of 100% metering of all consumers by Dec.2001.
(c) Reduction and finally, elimination of power theft within a specified time frame.
(d) Strengthening/upgradation of sub-transmission and distribution system by Taking sub-station as an unit on a priority basis.
2. If the above appears unattainable in the existing set up corporatization/
cooperatization/privatization of distribution, would have to be undertaken.
3. Since a large number of thermal stations within the State sector are running at a PLF below 40%,
immediate Renovation & Modernisation including Life Extension would need to be undertaken on a
urgent basis. Similarly, R&M/LE would require to be undertaken for old hydel power plants on priority.
4. Effective functioning of State Electricity Regulatory Commissions is essential for rationalization
of tariff, and balancing the interests of the consumer and the need for commercial viability f the utilities in
the environment where private sector participation in the industry is expected to gradually increase.
5. Unbundling and corporatization of State Electricity Boards/bench-marking through separate
distribution profit centres/corporations/companies may facilitate the Regulatory Commissions in
promoting competition within the power supply industry - competition being the key to lower prices.
6. It was noted that the power system network in country`s an unmatched reach to consumers
and with the installation of optic fibre cables along the existing power lines using its right of way, it has
the potential of generating very large resources in the coming years by providing facilities for
multipurpose communication including cable TV, IT services, Telecom services etc. Hence efforts need
to be made to creatively tap this potential source of large revenue from convergence.
7. In order to promote reforms, a new draft central legislation which obviates the need for
separate enactments for the States, is being considered. The draft Bill submitted by the NCAER would
form the basis for a national debate and a consensus on the contents of the new Bill. The States would be
sending their detailed comments on this draft Bill, to the Ministry of Power at the earliest.