The Economic Survey of 1997-98 shows the worst performance of the state electricity boards (SEBs) since 1985, with the overall rate of return (ROR) plummeting to -17.6 per cent for the year 1997-98.
According to the Survey, the ROR for 1998-99 is expected to go down further to -17.8 per cent.
In comparison to this year's figures, the previous year's Survey indicated an overall ROR of -17.2 per cent , while in 1995-96 it was -15.1 per cent. Interestingly, the overall ROR before 1995-96 was around -12 per cent.
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The poor performance of the SEBs is vastly accounted to the low tariffs that have been set by the state government and increasing costs.
According to the present Electricity (Supply) Act, all states governments are to prescribe power tariffs which would allow SEBs to generate a minimum return of 3 per cent on their net fixed assets after providing for depreciation and interest charges.
The Survey points out that the overall losses of the SEBs has more than doubled since the sector was opened up in 1991-92 and stood at Rs 9,453 crore in 1996-97.
The Survey also shows a massive increase in the hidden subsidy to the agriculture sector, with the figures for 1997-98 indicating a figure for Rs 23,010 crore.
This is more than a three-fold increase since 1991-92. The Survey indicates that this hidden subsidy is expected to increase to Rs 25,772 crore by 1998-99.
It shows an overall uncovered subsidy of Rs 10, 345 crore for year 1997-98.
Uncovered subsidy indicates the loss borne by the SEBs on account of state governments prescribing subsidised tariffs.
It does not paint a very optimistic picture for the power sector even if the state governments were to introduce a minimum tariff of 50 paise per unit.
The Survey states the "introduction of proposed national minimum agricultural of 50 paise/kwh would leave a substantial portion of uncovered subsidy."
The Survey shows that the states would have to generate an additional 12,000 crore to achieve the minimum rate of return of 3 per cent while introduction the 50 paise tariff is expected to generate an additional Rs 2,622 crore only.
It points that this poor performance has constrained the SEBs to raise enough resources to finance future programmes.
In addition to this, the Survey says that the centre has reduced it budgetary support to the central PSUs - which required forced them to raise resources through internal resources.
The Economic Survey also points plan funds to tune of Rs 1465.4 crore were left unutilised by the PSUs.