Political courage, to fix power sector

It is high time the political leadership found the courage to ask people to pay for the power they consume, and stopped pretending that financial engineering can fix the problem of ever-mounting losses of power distribution companies. A quarter century after reforms meant to improve utility bottom lines, it has now been reported that outstanding dues of distribution companies, or discoms, across states have ballooned to Rs 72,862 crore by June-end. This shows that the Ujwal Discom Assurance Yojana (UDAY), under which state governments took over the debt incurred by loss-making discoms, has been a failure. This is no surprise.

Political courage, to fix power sectorThe political class, cutting across parties, insists on giving power away for free to farmers and patronises rampant theft of power. This is at the root of the problem in the power sector, which has produced, besides putatively stranded, surplus power producers in this country of abysmally low per-capita power consumption, a huge burden of non-performing assets (NPAs) on the books of banks that lent to power generators. The grim reality is that unless state governments muster the political courage to purposefully ask people to pay for the power they consume, the sector will remain in crisis and no amount of financial innovation would help. And the mounting losses of power utilities would affect the quality of power, needlessly compromise state finances and stymie the overall economic growth momentum.

The talk now is of providing special loans to discoms so that they can square their dues with power generators. It would merely amount to throwing good money after bad. Sure, there’s a case for transparent subventions on power supply that are duly budgeted and well-targeted; open ended subsidies and giveaways are plain reckless and simply make no sense. The way forward is to set up a proper competitive market for power. Without an efficient, functional power sector, India cannot progress as a nation. India cannot afford the populism of free power and patronage of power theft.

Source: The Economic Times