An aspect of the government’s power sector reform programme has led to political dividends, but also a financial headache for some states. The Rajiv Gandhi rural electrification programme has brought power to the homes of people below the poverty line (BPL). Congress president Sonia Gandhi has not missed any opportunity to mention the scheme during her recent election speeches in Uttar Pradesh. States don’t hesitate to embrace the scheme. After all, the Union government provides as much as 90% of the funds and the Rural Electrification Corp. (REC) provides loans for the remaining 10%.
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The scheme has drawn scathing criticism in the past—the lack of rigour in monitoring outcomes has been a matter of concern.
Besides this, the one-time expense in creating infrastructure to enable rural India to access electricity also leads to a large, recurring power bill for state governments as user charges are subsidized. This is well demonstrated in the case of Orissa. According to the state electricity regulator, by April 2012, BPL consumers could be as high as 2.6 million and of this, a staggering two million are projected to “plug in” this year alone.
And, since they pay a meagre monthly bill of Rs 30 every month on the assumption that they light up a bulb and no more, the state’s finances are strained as it bears the subsidy. This spills into distribution company accounts since villagers do switch on fans and TV sets as well.
A rise in tariff could well undo the political equity earned in “plugging in” the villages. So, the state government is now reaching for help to fix the other leaks in the power system—transmission and distribution losses that include theft. Chief minister Naveen Patnaik has recently written to the Prime Minister seeking urgent intervention to access funds to improve the power systems in Orissa, where losses are as high as 45%. Since the distribution companies are privatized, they cannot access the funds, he says.
Interestingly, the regulator could do little about it all these years despite setting steep targets. For example, in 2010-2011, it set a target of bringing losses down to 23.77%. The losses, however, still remain over the 40% mark.
If the fund “tap” is opened to stem these losses, urban dwellers in Orissa will have impoverished rural dwellers to thank.
Will state governments succeed in curbing transmission and distribution losses? Tell us at views@livemint.com