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 evolved her power development policy, and shouldered that responsibility, in line with the State’s professed commitment to honouring and ensuring social security equations. Though the State Electricity Boards (SEBs) were statutorily required to function as autonomous service-cumcommercial corporations, they became in effect agents of the Governments to subserve the socio-economic policies of the State, and hence never felt the requirement to break even or to contribute to capacity expansion programs. This unaccountability culture in turn led to gross inefficiency at all levels – technical, institutional and organizational, as well as financial. And the cost escalation from such pampered inefficiency remained above the revenue realized from an irrational subsidized pricing practice. With losses mounting up, the field was getting cleared for some new entrants of ideas and practices, that the so-called ‘fiscal crisis’ at the turn of the nineties ushered in subsequently. Thus has commenced an era of reforms and restructuring of power sector in India, at the initiation of the World Bank that has also lit up an informed atmosphere of debates and discourses. However, little light has been thrown on the significant aspects of inefficiency costs involved in the SEBs’ forced functioning that allegedly finally warranted the reforms. The present study is a modest attempt at this. Here, inter alia, we have estimated, on some very plausible assumptions, the avoidable cost of inefficiency at a few amenable levels and found it to represent about one-third of the reported cost of electricity supply in India in 1997-98 ! And this is regardless of a number of other possible inefficiency sources at all levels of performance. Jel Classification : Q4; L94 Key words: India, electricity, cost inefficiency, commercial loss, reform.