Plight of the power sector in India : SEBs and their saga of inefficiency

Abstract

True to the spirit of a social-democratic State, India had originally
\nevolved her power development policy, and shouldered that responsibility,
\nin line with the State’s professed commitment to honouring and ensuring
\nsocial security equations. Though the State Electricity Boards (SEBs)
\nwere statutorily required to function as autonomous service-cumcommercial
\ncorporations, they became in effect agents of the
\nGovernments to subserve the socio-economic policies of the State, and
\nhence never felt the requirement to break even or to contribute to capacity
\nexpansion programs. This unaccountability culture in turn led to gross
\ninefficiency at all levels – technical, institutional and organizational, as
\nwell as financial. And the cost escalation from such pampered inefficiency
\nremained above the revenue realized from an irrational subsidized pricing
\npractice. With losses mounting up, the field was getting cleared for some
\nnew entrants of ideas and practices, that the so-called ‘fiscal crisis’ at the
\nturn of the nineties ushered in subsequently. Thus has commenced an
\nera of reforms and restructuring of power sector in India, at the initiation
\nof the World Bank that has also lit up an informed atmosphere of debates
\nand discourses. However, little light has been thrown on the significant
\naspects of inefficiency costs involved in the SEBs’ forced functioning
\nthat allegedly finally warranted the reforms. The present study is a modest
\nattempt at this. Here, inter alia, we have estimated, on some very
\nplausible assumptions, the avoidable cost of inefficiency at a few
\namenable levels and found it to represent about one-third of the reported
\ncost of electricity supply in India in 1997-98 ! And this is regardless of a
\nnumber of other possible inefficiency sources at all levels of performance.
\nJel Classification : Q4; L94
\nKey words: India, electricity, cost inefficiency, commercial loss, reform.