Power sector reforms in India never really took off. Either state governments were unwilling to let bloated state-owned utilities face competition from private firms or they were unwilling to stop cheap or free electricity for farmers, a huge vote bank.
As reported in Mint today, the Union government plans to take a small, but potentially effective step that may change things. It plans to link the funding of 65 such utilities to a rating system. The better the rating of a company, easier the terms at which it gets money. In theory, it should work.
At the moment a large number of these firms get easy money either directly from state governments or through their efforts. Until this link is broken, they are unlikely to improve their performance. It is important that pressure be applied on these governments to behave in a more prudent financial manner.
