Power boards' unbundling stumbles

Eight states will be knocking at the doors of the power ministry this month to seek more time to unbundle their electricity boards (SEBs) into separate transmission, generation and distribution entities.

This is not the first time such extensions will be sought. Nor is it likely to be the last, say industry sources.

The eight states which are yet to unbundle their SEBs "" Bihar, Jharkhand, Kerala, Punjab, Chhattisgarh, Tamil Nadu, Meghalaya and Himachal Pradesh "" are putting off the move because of the debate over the benefits of unbundling.

Also, the unbundling is being opposed by the SEB employees since it is seen a step towards privatisation, and possible job losses. This has not happened in any state so far, though.

Under the Electricity Act, 2003, all SEBs were supposed to be unbundled by 2004.

As the country enters the 11th Plan period (2007-12), 12 states have unbundled their SEBs "" Assam, Maharashtra, West Bengal, Orissa, Haryana, Andhra Pradesh, Uttar Pradesh, Uttarakhand, Rajasthan, Delhi, Gujarat and Madhya Pradesh.

According to Sekhar Reddy, a power expert who has written a report on the impact of unbundling for the Indian Institute of Public Administration (IIPA), there should be no dispute on the benefits of such a move. "Unbundling is a very important part of electricity reforms because it brings in transparency and accountability in the system."

"The main idea this is to make SEBs commercially viable," he said.

SEBs generally hide a lot of inefficiencies, which are all shown as transmission and distribution losses. "The unbundling of entities, with separated balance sheets, generally leads to better performance," said a Central Electricity Regulatory Commission (CERC) official.

States like Tamil Nadu have been resisting unbundling on the ground that they are doing extremely well without unbundling. Reddy, however, refutes the claim. "It is a fallacy," he says, adding that Tamil Nadu board has an outstanding debt of about Rs 9,000 crore and is borrowing funds to repay the amount.

The IIPA study found considerable improvements in the performance of the utilities after restructuring. Gujarat, Andhra Pradesh and Karnataka have shown good results after unbundling, though in Uttar Pradesh and Rajasthan, the move has not yielded the desired results.

The study says the states which have ensured the change have reported reduction in losses, higher investments and capacity additions, improvement in efficiency, customer care, billing and metering, and greater accountability.

Some, however, differ. According to a senior UP power corporation official, unbundling does not help because the work culture remains the same, as does the administrative control structure and political interference.

Reddy, however, says unbundling should not be seen as an end but a "beginning to a new and efficient system."