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 Madhya Pradesh State Industrial Development Corporation Limited

 

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Economic Development Policy
POWER
INTRODUCTION

Power is a critical component in the overall development of the economy. All forms of economic activity, be it agriculture, industry or services, is reliant on the uninterrupted supply of power.

OVERVIEW

Madhya Pradesh has witnessed significant growth and development in the power sector during the past five decades.  Madhya Pradesh State Electricity Board (MPSEB) formed under the provisions of the Electricity (Supply) Act 1948, is responsible for power generation, transmission and distribution in the state and the overall growth and development of the power sector.

The MPSEB before the Chhattisgarh split had 4260 MW of installed generating capacity comprising of 3387 MW of thermal stations and 867 MW of hydel generation.  MPSEB presently serves over 6.5 million customers, including about 1.15 million agriculture customers.

Relative share of various functions in state’s power sector outlay
Source: VIII Five Year Plan of the State
The power sector today in Madhya Pradesh is faced with severe problems and major challenges.  The growth in installed capacity has not been commensurate with the demand for power and therefore shortages - both energy and peak - prevail, necessitating restrictions and power cuts.  Energy shortages have increased from about 6% in 1992 to about 12% in 1999; and peak shortage has reached almost 20% in 1999.  The transmission and distribution system is overloaded and is beset with problems of high line losses, low voltages and lack of reliability.

The creditworthiness of MPEB has been on the decline, due to its poor financial performance and growing losses, causing increased burden on the State's budget. The poor financial viability, has affected MPEB's ability to rehabilitate and augment the power system and to bring in new capital investments to meet the developmental needs of the power sector.

The existing system is weak and its rehabilitation alone needs large investments. In the vertically integrated power utility structure, functional priorities are getting diluted.  The Transmission & Distribution (T&D) system and the metering, billing and collection systems require revamping. Re-engineering of the processes with help of information technology could substantially improve the quality & reliability of supply and customer service.  With declining profitability over the years, the MPEB has not been able to bring in the additions to the installed generating capacity and to revamp the T&D network to meet the escalating demand.

POLICY THRUST

 The Government recognises the significance of power in the overall context of economic development of the State. In line with the overriding theme of connectivity of the Economic Policy of the State, the Power Policy seeks to connect the various categories of customers, industrial, agricultural, commercial and residential to reliable, superior quality power at reasonable rates.

objectiveS                     
The State Government has identified the following objectives for the power sector:
» To meet the demand for electricity for various categories of customers both in terms of quality and quantity of power, in long-term.
 
» To ensure reasonable and commercially viable tariff structure so as to facilitate rapid growth of State’s economy.
 
» Restructuring of the power sector to provide for accountability and responsibility so as to make the sector creditworthy for contracting new investments.
 
» Promote corporatization so as to improve upon functioning of State Utilities.
 
» Distancing the State Government from power sector corporate entities so as to ensure functional autonomy in power sector.
 
» To remove obstacles in the way for healthy, dynamic, financially viable and self-sustaining growth of power sector.
 
» Ensuring availability of legal and regulatory framework to support overall development in power sector.
 
» Gradual removal of subsidy and reduction of cross subsidies.
 
POLICY INITIATIVES                        
» State Electricity Board shall be reorganized on functional basis and new entitles shall be incorporated under Indian Companies Act.
 
» Progressive divestment in different segments of power sector shall be made, if found necessary.  The result of efforts being made in other States in this regard shall be monitored continuously and suitable decision shall be taken thereafter.
 
» State Government shall limit its role to policy directives only and distancing the Government from power sector entities shall be achieved gradually.  The Directors of the successor corporate entitles to SEB shall therefore be recruited mostly from outside the Government.  They shall be professional experts in different fields. The functional area recruitments from outside will include finance, commercial, human resources, corporate planning and IT expertise also.
 
» State Government shall take a lead role in financial restructuring of successor entities of MPSEB.
 
» The transfer scheme from MPSEB to new corporation entities shall be designed in such a way that the balance sheets of the new entities are clean from day one.  The past liabilities shall not be transferred immediately to the new entities.  All the old liabilities shall be parked with MPSEB, which will be the holding company for new entities.
 
» The new Corporate entities shall be made to adopt efficient planning, control and management system with the help of information technology.  There shall be an inbuilt feature of MIS (Management Information System) and cash flow management system.
 
» State Government shall provide all the support to power sector corporate entities for completion of the projects and 100% meterisation Programme.
 
» State Government has enacted Urja Adhiniyam 2001 to prevent theft of electricity and special drives shall be made to support distribution entities to reduce and gradually eradicate theft of electricity from the State.
 
» While corporatizing the distribution function, some areas may be given to private sector as pilot project.  On review of performance report on the pilot project, privatization may be further extended to other areas.
 
» State Government shall encourage and support successor corporate entities of State Electricity Board to take up various projects as BOT, BOOT, BOO, Joint Venture, Management Contract, etc.
 
» State Government shall provide for speedy clearance for renovation and modernization projects for existing thermal power generating units.
 
» For transmission of power, all the support shall be provided by the State Government for implementation of projects to create east to west and north to south corridors.  Looking to the centralised location of State of Madhya Pradesh and provisions of Electricity Bill 2001, State Transmission entity shall be encouraged to take up such transmission projects, which may be used later on, for power trading.
 
» State Government shall provide all the support for formation of joint venture companies in the state for development of hydel power.  State Government shall monitor/steer implementation of such hydel projects so as to improve upon thermal hydel mix in the state.
 
» State Government shall monitor energy audit of MPSEB or its successor entities.  For this purpose the target date for metering all supplies in the state is 31st December, 2001.
 
» State Government has already enacted and commenced Madhya Pradesh Vidyut Sudhar Abhiniyam 2000 in the state, which provides for recovery of 75% of cost of supply of electricity from all class of consumers within a period of five years.  State Government shall provide all the support to MPSEB or its successor entities and M.P. Electricity Regulatory Commission for implementation of the same.
 
» So far as captive power policy in the state is concerned, State Government shall emphasize on coexistence of State Electricity Board and industries because both are going to be benefited by the survival of each other.  So far as cess on captive power generation is concerned, State Government shall review it every year and shall increase or decrease it as per the requirement at that point of time.
 
» State Government had enforced a very progressive policy for non-conventional energy sources, however, the main attraction of commercial tax benefits is gone now because of vat alignment.  State Government shall now focus the non-conventional energy policy so as to electrify such rural areas where it is not possible to provide electricity by conventional methods.

Rationalisation and Targeting of Subsidies
 
» State subsidies shall be reduced in a phased manner, however, the subsidies shall be made available to compensate for electricity supply to poor and needy consumers at affordable prices.
 
» State Government shall play a pro-active role in protecting and safeguarding the interest of small rural consumers and the poor consumers.
 
» Agricultural Department of the State Government shall provide subsidy to diesel pump set for farmers.
 
» State Government shall release balance RE subsidy and other payment due to MPSEB by way of cash after adjusting the sums payable to Government of Madhya Pradesh from MPSEB.
 
» State Government shall issue directives to the municipalities and legal bodies to make timely payment of current bills of State Electricity Board failing which disconnections shall be made as per tariff order of MPERC.
 
» State Government shall provide adequate funding through budget to MPSEB against outstanding dues on municipalities and other GOMP bodies.
 
» State Government shall act as facilitator for new industrial units proposed to be set up in the state of MP subject to provisions of MP Vidyut Sudhar Adhiniyam, 2000.  In case MPSEB or its successor entities get affected by any of the policy decisions of the State Government the subsidy/ subvention shall be provided to SEB or its successor entity through industries department.
 
» State Government shall assist MPSEB for settlement of dues owned to Central Sector Undertakings, Bond repayments.
 
» State Government shall make timely and adequate budgetary appropriation to meet its subsidy and subvention payments so as to ensure that all dues are paid in cash to MPSEB within not more than 6 months of the raising of the claim by MPSEB or such entities or in such other shorter time and manner as may be directed by MPERC.
 
» State Government shall ensure that sufficient budgetary allocations are made to MPSEB in a timely manner for efficient and timely implementation of ADB funded projects.
 
» GoMP shall make timely and adequate budgetary appropriation to meet  MPSEB’s balance of receivables from municipalities and other government bodies, which should not exceed the immediately preceding one month, equivalent of sales at any time.