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Naidu to go ahead with plans to reform AP power board

M S Shanker in Hyderabad

The determination of Andhra Pradesh Chief Minister Nara Chandrababu Naidu, to put the state back on a sound financial path is loud and clear. He made that clear when he announced his government's decision to restructure the cash-strapped Andhra Pradesh State Electricity Board and later chided the opposition parties for their "anti-development" attitude.

Naidu has realised that he will have to be bold and assertive in taking the initiative for development regardless of the opposition's views. At a all-party meeting called recently to announce the plans to restructure the APSEB, the major opposition parties -- Bharatiya Janata Party, Communist Party of India-Marxist, and Communist Party of India -- rejected Naidu's plan. The main opposition party, Congress, and the Majlis-e-Ittehandul Muslimeen, however, kept away from the meeting.

The Congress squarely blames the Telugu Desam Party for the problems faced by this once-power surplus state. "It is no secret that the TDP is responsible for the state's present financial crisis. Very low budgetary allocations were made to generate additional power during the TDP rule from 1983-89, pushing APSEB into the red," alleges K Rosaiah, who was a former power minister and Congress chief.

According to Rosaiah, between 1983 and 1989, only Rs 14.26 billion was spent on the power sector and 934 mw of hydel power was added to the grid besides 577 mw by the National Thermal Power Corporation. Thermal generation during the same period was nil. In comparison, he claimed the Congress government during 1989-94 acted with foresight, spending Rs 44.65 billion and adding 234 mw of hydel and 1260 mw of thermal power, besides 100 mw of wind power.

"The World Bank has agreed to provide an assurance of Rs 4.2 billion for improving transmission lines if the state government gave a matching grant," he said. "But the offer could not be utilised by successive TDP governments."

Some opposition and trade union leaders accuse Naidu of receiving huge kickbacks to restructure the APSEB. "If that is not the case, why does the state government have to handover the distribution system to private parties," asks P L Mahendra, a member of INTUC.

If the APSEB's estimated loss is Rs 230 billion, then the government will need at least Rs 180 billion to revive it. The government draft proposes replacing the board with three distinct entities to handle separately the functions of power-generation, purchase and transmission, and distribution.

The reforms draft envisages the setting up of an AP Power Corporation to generate and sell power like "any other private generating company." A transmission corporation would purchase power from various sources, including the AP Power Corporation, and man the transmission systems. Distribution of power to the consumers and billing would be entrusted to seven or nine distribution companies.

The entire activity in the power sector would be regulated by an autonomous Tariff Regulatory Commission. Under the proposed set up, the government's role would be restricted to planning the sector's growth or meeting its demands. The government would also take the necessary steps to meet its socioeconomic commitments in respect of sectors like agriculture or for the economically and socially weaker sections by providing necessary budgetary outlays.

A confident Naidu said: "The proposed reforms should make the state power sector economically viable, so that international and national funding agencies besides private investors could be tapped for investments." He feels that the changes were aimed at introducing a spirit of competition to make power supply commercially viable and end the dependence of the APSEB on the government.

While Naidu may be right, it is worth examining what pushed the APSEB into into the red. While the Congress's allegations about inadequate budgetary support are true to a certain extent, it does not tell the whole story. The TDP government came to power first in 1983 and again in 1994 on the slogan: 'Power at subsidised rates for the agriculture sector.'

The TDP government also increased the number of agricultural pump sets number over the years. There are about 1.97 million agricultural connections in the state, besides another 100,000 illegal pump set connections. To provide a single agricultural connection, the APSEB has to invest a one-time cost of poles and conductors at Rs 8,500, transformer and lines at Rs 28,000, and generation and transmission at Rs 60,000. The grand total: Rs 96,500. Although it is a social obligation, can any government afford to invest such an large sum? Apart from this, APSEB has to incur a recurring expenditure of Rs 8,191 annually on cost of power supplied per line!

In spite of the chief minister's repeated assurances that the new reforms will not lead to a workers' retrenchment, many trade unions remain apprehensive and have accused Naidu of taking the decision at the behest of World Bank from which he has sought a Rs 70-billion loan.

"It's a total surrender to the international financial institutions -- lock, stock and barrel," claimed an AITUC leader. The Joint Action Committee comprising the various trade unions in the APSEB held a two-day strike recently, but to little avail.

Nevertheless, it remains to be seen what will happen if the opposition parties join hands with the trade unions to support the cause of the agitating employees, who have threatened to intensify their struggle against the government's decision.