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K.V. Kurmanath

Hyderabad , May 3

THE World Bank has observed that the pace of reforms in Andhra Pradesh has slackened since the new Government took over after the May 2004 elections.

"The direction of reforms in Andhra Pradesh remains largely unchanged, but the pace has slackened," a World Bank document said.

Two components of APERL (Andhra Pradesh Economic Reform Loan)-supported reform programme have suffered during the year.

They are charging for electricity used by farmers and public enterprise reform programme.

The simplified implementation completion report was an evaluation of a loan/credit of $220 million for the second Andhra Pradesh Economic Reform. With a lending portfolio (net commitments) of about $1 billion, Andhra Pradesh has the second largest bank programme among Indian States.

The report said there had been a marked slowdown in the pace of public enterprise (PE) reform programme, as the new government reviewed the whole initiative.

The previous government initiated the Phase II of PE programme 2002 that involved 68 enterprises, which were to be addressed over a five-year period. Of these, 30 enterprises were closed, privatised, or restructured in 2002-03 and 2003-04.

"But the programme did not move forward in 2004-05. The new government maintains that only loss-making enterprises will be restructured. It also feels that assessments of the firms' financial performance need to be updated before proceeding with further PE reforms," the report said.

On the free power scheme, the World Bank report pointed out "It is quite likely that the trend of falling power sector losses over the last three years will be reversed in 2004-05. This is due to the combined effect of no cost recovery from farmers, and increased consumption by the farm community. The latter is resulting from a big jump in unauthorised agricultural set connections," it observed.

One of the major factors that affected the reform implementation was political difficulty of metering and tariff setting for farm electricity consumption. "This has strong implications for the overall fiscal situation of the State."

Though the governments initiated "a number of laudable reforms actions in the power sector", they continued to face strong political opposition when it came to metering agricultural electricity consumption, reducing overall government support and targeting subsidies to poor farmers.

Despite the setback in the two components, other gains of the programme had continued. Notwithstanding some slippage during the election year (2003-04), the new government continued to emphasise fiscal prudence and had achieved good results.

The report, however, rated the borrower's performance as satisfactory.

The report observed that the government's attitude towards the private sector, public-private partnerships and outsourcing was favourable.

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