Distribution to the end-consumer continues to be the weakest link in the power sector value chain, according to a World Bank report.

The report, prepared on the request of the Centre, recommends freeing state utilities and regulators from political interference, increasing accountability and enhancing competition in the sector.

The study calls for a transition from administratively run to commercially run utilities.

Maharashtra’s experience with private participation highlights the potential for improving distribution by enhancing accountability – as seen in companies investing in system strengthening, tightening their commercial practices, increasing efficiency and improving the quality of service, said Sheoli Pargal, Economic Advisor, World Bank, and author of the report.

Lending to power sector

On lending to the sector, Pargal said overall lending to the sector stood at Rs 4,88,300 crore, which is higher than any other bank credit to other infrastructure. Lenders to the sector chose to lend even in the case of continued inefficiencies.

The report said the financial health of the sector was fragile. The total accumulated loss was at Rs 2.88 lakh crore or three per cent of GDP in 2013. Over the last two decades, the sector required periodic rescues from the Centre. A bail-out of Rs 35,000 crore in 2001 was followed by a restructuring package of Rs 1.9 lakh crore in 2012.

Among its key recommendations, the report said banks/ lenders should hold utilities accountable for efficient operation and apply collective pressure against lending to those who were not credit-worthy

The Centre should pledge against extending further bailouts, give regulators autonomy and adequate resources and hold them accountable for performance.

State Governments should pay subsidy transparently, fully, and on time. They should insist on evidence that the subsidies were going to intended recipients.

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