The Hindu Business Line : `Powerless' in Maharashtra

MAHARASHTRA WAS ONCE a model State in many respects, most notably for the efficiency of its power sector. Even now it continues to be a model for the power sector, but for altogether different reasons: A bankrupt Electricity Board, crippling power shortages, protests by the public against continuous load shedding and police action against them. All because of a decision about a decade ago and the State's continued obsession with that single issue — Dabhol.

The State's power sector managers seem to have neither the time nor the energy to draw up perspective plans. To top it all, a few months before the Assembly elections last year, the then Congress (I) Government generously announced supply of free power to agricultural consumers. The ground realities have changed since, and the incumbent Chief Minister, Mr Vilasrao Deshmukh, has been forced to reverse the decision of his predecessor. Last week's announcement that power would no longer be free for farmers was inevitable, considering the State's financial health and, more important, the poor power position. The Government says it will save Rs 500 crore a year by discontinuing free power supply; this largesse of last year (from July 2004) has cost the exchequer Rs 1,700 crore. Recently, the Union Power Minister, Mr P. M. Sayeed, drew an apt analogy on Maharashtra's decision to withdraw free power: A mother would continue to hold her baby in a wrecked ship only as long as the water reached her chin. After that, she would try to save herself.

However, those concerned about the state of affairs hope that Mr Deshmukh's decision will mark a reversal in Maharashtra's power sector fortunes. There is, hopefully, the realisation that freebies do not work if costs are not recovered. A solution is reportedly in sight for the Dabhol imbroglio. This means that about 2,000 MW of much-needed capacity will be available to the State, which had to go with a begging bowl to the Centre to bail it out of the shortage. Hopefully, the State's power managers will now be able to devote time and attention to planning for the sector's development. Capacity addition requires at least four years, from the time a project is planned to when it goes on stream. Just because the Maharashtra Government has decided to end free power for farms does not mean a financial turn around for the State Electricity Board. That may require another five years at least.

Maharashtra's case is a standing example for other States, notably Tamil Nadu and Andhra Pradesh, which too supply power free for agricultural consumers. It can be argued that giving free power to farmers is the act of a concerned State, but for that to really benefit the needy, more innovative schemes are required. The power sector has to be run on purely commercial lines and any subsidy has to be targeted properly. Otherwise it will only lead to wastage and inefficient use of scarce resources — some of the reasons cited by Maharashtra for withdrawing free power. Along with doing away with free power, Maharashtra, which has decided in-principle to reorganise its Electricity Board, has to now go ahead with reforming the power sector, if it is to once again become the shining example that it was for the whole country. And, hopefully with the Dabhol issue resolved, things will brighten up.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
`Powerless' in Maharashtra

VAT: There's value in the design

The yin and yang of business

Ending the testing times for students

The changing face of banking

Stress testing and Basel accord

Hope and frustration in Afghanistan — Mr Jean Mazurelle, World Bank's country manager in Afghanistan

FDI in retail