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Indrani Dutta

KOLKATA, Nov. 7

EVEN as it looks into the issue of transition financing for the power sector, the Deepak Parekh Committee has suggested the setting up of a power sector reform fund (PSRF).

All existing liabilities of the State utilities as well as existing receivables, privatisation proceeds, grants from the Centre and other donor agencies should be transferred to the PSRF, the Committee has said.

The Committee which was set up in March 2002, to suggest ways of toning up the Accelerated Power Development and Reforms Programme (APDRP) while setting out some broad principles for financial restructuring of State electricity boards (SEBs) said that setting up the PSRF would mitigate the risk of policy reversals.

The panel has recommended that State governments as the sole owner of the SEB and prime mover of the reform process should consolidate the liabilities of the SEBs and write off its own loans.

The Committee is also in favour of the existing creditors — including power and fuel suppliers as well as financial institutions — writing down their claims, in view of the fact that they would be the principal beneficiaries of the financial restructuring exercise that is aimed at facilitating power sector reforms.

As regards the future losses of the SEBs, mainly the losses during the transition period, the expert committee has come up with a slew of measures saying that the state sector's losses, till a turnaround is effected, could be reduced through some contribution from various stakeholders.

This included a contribution from the consumers although indirectly. Elaborating on this, the panel said that the Government, in consultation with the regulator and the consumers, could agree to divert a portion of the efficiency gains (that would accrue to the consumers due to the reform process) through a transparent surcharge.

In order to induce the utility to aggressively pursue efficiency gains and also to attract private investors, the committee has strongly urged the regulatory commissions to try to institutionalise a credible multi-year regulatory regime with proper incentives for the utilities to pursue loss reduction and also agree to divert a portion of the surplus from future operations, to service liabilities from the past.

To take care of future deficits the committee envisages three primary contributions from the State. First, it should expedite the process of distribution privatisation. Secondly, during the transition period, the Government should extend subsidy support and finally the State Government should foster commercial discipline by ensuring prompt payment of electricity bills by its own undertakings and also by providing law and order support to utilities to check theft and pilferage.

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