Original Date: 25 April, 2001

The power sector in India is characterised by an inefficient distribution system owing to inadequate investment and unplanned growth. This results in large losses, interruption in the power supply and poor voltage. The lack of metering arrangements at the various stages of the distribution chain and supply to consumers, especially agriculturists without meters, makes it difficult for a proper energy accounting. Hence an action plan.

Accelerated Power Development Programme (APDP)

To effect reforms in the power sector, the Centre has approved the Accelerated Power Development Programme (APDP) with an outlay of Rs. 1000 crore in 2000-2001. APDP is expected to bring down generation cost, thus bringing down the cost of power to the common person. APDP would finance projects for renovation and modernisation or life extension or upgrading of old power plants and upgradation of sub-transmission and distribution network including energy accounting and metering.

Although the Ministry of Power has already prepared a plan and taken steps for generation of an additional 1 lakh MW of electricity to meet the power demand by 2012, the APDP scheme is expected to improve the situation in the short term. This will give relief to the people suffering from shortage of electricity. The immediate benefits of the scheme are expected to be visible to the people through improvement in plant efficiency and renovation and modernisation of old plants.

APDP will continue till the year 2012 with enhanced outlay from 2001-02 onwards. In the first phase 50 distribution circles in 16 different States have been identified for implementing the programme. It is geared to cover the remaining distribution circles in the country in a phased manner utilising the fund available under APDP.

The special category states will get 100 per cent of the project cost as 90 per cent grant and 10 per cent loan. Non-special category states will get 50 per cent of the project cost through a combination of half grant and half loan. Any diversion or mis-utilisation of APDP funds will be liable for adjustment with 10 per cent penal interest against the Central Plan Assistance (CPA) given to the State in the succeeding years. The APDP fund will be provided as additional CPA over and above the entitlement of the State.

Theft of power alone is estimated to cost the country over Rs 20,000 crore every year. If this revenue is saved, the power sector can show positive returns. This amount would be sufficient to wipe out the existing cumulative losses of the State Electricity Boards (SEBs).

While the budget allocation in the current year for APDP is Rs. 1,000 crore, another Rs. 1,000 crore is proposed to be raised from institutions like the Power Finance Corporation, IDBI and ICICI. In the case of special category States like Jammu & Kashmir and Himachal Pradesh, the entire cost of the project will be met under APDP in the form of 90 per cent grant and 10 per cent loan. In the case of non-special States 50 per cent of the project cost will be met from APDP out of which half will be in the form of grant and half as loan. The remaining 50 per cent of the cost of the project can be met by the utility from the States' internal resources or loans from the Power Finance Corporation, Rural Electrification Corporation, financial institutions and suppliers' credit.

Power Reforms

Priority will be given to projects from those States which commit themselves to a time-bound programme of reforms. These will include the States setting up State Electricity Regulatory Commissions (SERCs) and making them operational. The State power utilities would have to send the first proposal for fixation of tariff to the SERC. To ward off any apprehension that the States may have regarding the unbundling of SEBs into separate generation, transmission and distribution companies, the Centre has suggested that even if some States wish to retain the SEB and try and achieve a 3 per cent rate of return with an independent regulatory commission besides 100 per cent metering, energy auditing and enforcing commercial accountability at regional distribution centres, the Union Government would support the move.

if the States would like to combine generation and distribution for the private sector and create companies through disinvestment and joint ventures, it would be supported by the Centre. States undertaking these reforms will be given incentives in the form of additional allocation of power, enhanced financing through PFC and REC besides liberal financing under APDP.

Under Phase 1, all substations up to 11 kV outgoing feeders and all FIT/Bulk Consumers were covered by March 2001. Under Phase II all other consumers will be covered by an agreed date. APDP funds shall also be available to the States which otherwise achieve high level of operational efficiency and financial viability. So far 12 States have signed MOUs with the Union Government. In Orissa where distribution has been fully privatised, the revenue of distribution companies has gone up by 30 per cent.

The Ministry has formed two committees - one comprising technical experts who would look into all aspects of distribution and another to study distribution from the policy angle. A monitoring committee will be constituted with the Power Secretary as its chairman. The committee will prepare guidelines, approve projects and monitor the implementation in each State.