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Distribution centre: A file photo of high voltage power transmission lines.

Anil Sasi

New Delhi, Oct. 26 The Government’s effort to reform the electricity distribution business is proving to be a case of throwing good money after bad. As the Centre’s flagship accelerated power development reforms programme (APDRP) goes in for a third makeover, a performance audit of the scheme by a Parliamentary panel shows that recipient States have been indulging in rampant mismanagement of funds disbursed to them as grants and loans.

The panel, which audited 294 projects under the scheme across 29 States between 2002 and 2006 having a total approved cost of Rs 10,255.21 crore, concluded that States have been resorting to incorrect financial reporting for getting APDRP funds and have been indulging in widespread diversion of funds for “unauthorised purposes.” As a result, the primary objective of the aggregate technical and commercial (AT&C) loss reduction by nine per cent per annum, as envisaged originally under the Scheme, has gone in for a toss, with a meagre 1.68 per cent loss reduction per annum achieved during the period. According to the Public Accounts Committee’s (77th report) audit findings, 17 out of the 29 States either did not operate separate account heads and bank accounts for APDRP funds or did not operate them correctly, as warranted by the scheme to maintain accountability of fund use. Incorrect financial reporting amounting to Rs 676 crore was detected. There were instances of diversion of funds amounting to Rs 182 crore by 10 States for “unauthorised purposes” and diversion of Rs 432 crore by seven States for adjustment against various dues of the utilities.

Kerala, Madhya Pradesh, Chhattisgarh and Himachal Pradesh are among those guilty of incorrect reporting of AT&C loss reduction, which form the basis for funds transfer. Maharashtra, Karnataka, Andhra Pradesh and Assam are among the States delaying release of funds to distribution utilities.

The incentive mechanism of APDRP, which was specifically roped in to prod State Governments to get on with the reforms process, has been unsuccessful, with just Rs 1,575 crore released as on January 2007, against the Tenth Plan provision of Rs 20,000 crore. As a consequence, only three out of 29 States managed to achieve the target of elimination of the gap between average revenue realisation and average cost of supply. In eight States, this gap has shown a deteriorating trend.

Despite the lack of progress, the Centre has decided to hike the size of the re-structured APDRP during the Eleventh Plan period to Rs 51,577 crore.

“There are clear drawbacks in the scheme, which was trying to address in the newly restructured APDRP for the current Plan period. The distribution-end is the biggest drag on new investments coming into the country’s power sector and there is no way out but to pursue reforms anew,” a Power Ministry official said.

More Stories on : Power | States | Economic Offences

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