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March 2, 2001                                       Feedback  

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Maharashtra may lose Rs 65 billion

Renni Abraham

An estimated Rs 65 billion of the Rs 130 billion Maharashtra needs to overhaul its energy sector hangs in the balance with Finance Minister Yashwant Sinha having set a deadline of December 31, 2001 for states to reform their power utilities.

In his Budget speech, Sinha made it clear that central funds to the states for the power sector would hinge on 100 per cent metering, an acceptance of State Electricity Regulatory Commissions (SERC) determining the tariff and commercialisation of the distribution network by December 31, 2001. States that complied with these conditions would get preferential allotment of power from the central grid.

Haryana, Gujarat, Delhi, Madhya Pradesh and Uttar Pradesh have already signed memoranda of understanding (MoUs) with the Centre agreeing, among other things, to commercialise the distribution wing of their state electricity boards (SEBs).

Maharashtra's energy minister Padamsinh Patil said, "We should have already signed the MoU by now. I will take up the issue with the energy department the moment I get back to Bombay from Aurangabad."

Maharashtra has initiated the unbundling of MSEB (Maharashtra State Electricity Board) into three distinct entities and introduced an energy audit to identify and stem the huge (31 per cent to 36 per cent of the total power generated) transmission and distribution losses. But it has been sitting upon the MoU for the last several months.

After an in-depth study of Maharashtra's energy sector requirement, MSEB estimated that it would need Rs 130 billion to modernise and upgrade power plants in Maharashtra.

The state can float bonds to raise some of the money required for all this. In 2000, MSEB raised Rs 5 billion through bonds and plans on raising more money this financial year but it clearly can't rustle up all the cash.

And it has chalked out an ambitious plan to enhance power generation by 1500 mw in three of its power plants, and cut the MSEB's transmission losses.

According to a senior state government official, the government wants to expand the generation capacity of the Uran, Paras and Bhusawal power plants by 250 mw, 250 mw and 1000 mw, respectively. This additional 1500 mw is expected to cost Rs 60 billion at the rate of Rs 40 billion per mw generated.

The proposal also includes setting up 24,000 distribution transformers at a cost of Rs 8 billion; erecting 230,000 km of high tension transmission wires at a cost of Rs 25 billion, setting up new substations of 33 KV to 400 KV (Rs 18 billion), renovating and modernising power generation plants (Rs 24 billion) and installing 2.5 million electricity meters (Rs 4 billion).

The question is whether MSEB would be able to comply with the finance minister's stipulations of 100 per cent metering by December-end. Ajay Arora, assistance vice-president, Ernst & Young, seems inclined to think so.

"It won't be 100 per cent in number of meters (MSEB has 13 million consumers). Installation of meters at high-voltage levels would serve the purpose as well. Right now MSEB is not able to assess what energy input levels exist in a particular area."

Arora said the central decision to link the reform process directly with the funds disbursal was a step in the right direction and would greatly help in reducing the transmission and distribution losses of SEBs throughout the country.

"As far as the plan outlay for the reform process is concerned as we move further, the privatisation of the distribution network would through its internal accruals be able to contribute a huge share in the anticipated costs of modernisation and upgradation of the energy sector."

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