The Hindu Business Line : MSEB unplugged

THE MAHARASHTRA STATE Electricity Board (MSEB) has been unbundled. Apart from entities that will take care of generation, transmission and distribution, the State Government, acting in the face of an unprecedented power crisis, has also carved out a holding company for policy planning. Yet, the unbundling saga is by no means over. The well-entrenched labour unions are opposed to the move while political opposition hopes to get legal redress. They reckon this is a precursor to privatisation, which it may well be. But those protesting against the Government's decision should analyse the plight of the SEB, once considered a model for all States. The State is facing an unprecedented power shortage — estimated at about 3,500 MW — resulting in black-outs in various parts. The MSEB has been so starved of funds that it has not added any significant generation capacity in the past 10 years. All the ills can be blamed on Enron's power project, but that is just the easy way out. Enron was just one reason. Successive governments have made sure that the power sector is not run on commercial lines.

Anyway, even if the Maharashtra Government had not unbundled the SEB now it would have had just another six months to do so. For, the Electricity Act 2003 mandates that all State power utilities be unbundled — not necessarily privatised — and the Union Power Ministry was quite reluctant to grant Maharashtra another extension beyond six months from June 9. The Ministry's argument is that the Electricity Act is a law of the land and it is up to everyone to follow it. Under pressure from various quarters, including its own allies, the United Progressive Alliance Government had in June 2004, shortly after assuming office, granted a one-year extension for States that had not unbundled their power utilities. Several States have sought further extension of time and the Power Ministry has said it will extend the deadline by six more months. It remains to be seen whether the Centre buckles under pressure to further relax this timeframe.

Unbundling seeks to bring the various aspects of the power sector — generation, transmission or distribution — each into sharper focus. For instance, having an independent transmission or distribution entity will make practical sense in a situation where there are a number of private generating companies each wanting to channel the electricity to consumers across the State; they need not all invest in transmission and distribution. The Maharashtra Government has assured that the three entities created to handle generation, transmission and distribution will be autonomously run and that they will induct experts from the private sector on the boards of each. This will be a welcome step. The State Government has also set up a committee that will work out a viable revenue model for the three entities after which it will decide on the next phase of restructuring the distribution sector. The success of Maharashtra's power sector unbundling will be keenly watched and it is hoped that the State once again becomes a role model for others.

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