Andhra Pradesh needs to strengthen its transmission and distribution infrastructure if it wants to revitalise its electricity sector and achieve 'Power for All' in the state, according to a World Bank study.
Andhra Pradesh needs to strengthen its transmission and distribution infrastructure if it wants to revitalise its electricity sector and achieve 'Power for All' in the state, according to a World Bank study.
The report titled 'More Power to India: The Challenge of Distribution,' presented in Hyderabad today, is a review of the Indian power sector across key areas of access, utility performance and financial sustainability.
The study recommends freeing utilities and regulators from political interference, increasing accountability and enhancing competition in the sector in order to move it to a higher level of service delivery. It calls for a transition from administratively run to commercially run utilities.
The power distribution sector in earlier undivided AP made losses since 2012-13. This is despite the state being an early reformer (early 2000s), and having taken initiatives like improved metering, regular energy audits, dedicated industrial feeders, regular increase in tariffs and despite it being among the states with lowest technical and commercial losses (AT&C) in the country, it said.
The report points out several reasons that have constrained the power sector in the state from growing, including the cost of power purchase which rose sharply for distribution companies (discoms) from Rs 2.81 per unit in 2009-2010 to Rs 3.39 per unit in 2011-12 and to Rs 4.25 per unit in 2012-13.
The volume of power purchased from short term sources rose from 860 million units (MU) in 2009-10 to 10,094 MU in 2012-13 – a 14 per cent rise.
"As the government's 24x7 power initiative builds up momentum, utilities need to make sure they are well prepared to use the funds that will become available to strengthen their transmission grids and distribution infrastructure, create robust corporate governance mechanisms, enhance billing and collection systems, institutionalise regular tariff reviews ..." said Sheoli Pargal, Economic Advisor, World Bank.
The study recommended that the sector develop a commercial orientation once there are clear signals of political will to run the sector in a commercial manner, with transparent subsidies going to only those who are eligible for such support, then day-to-day operations should be turned over to professional managers.
The utility should be compensated upfront with a transparent subsidy for non-revenue generating customers and its management required to collect all revenue due to it from customers who are not entitled to subsidy, the study suggests.
"The key recommendation of the study is to allow utilities to operate as commercial entities and subsidy should be transparent and utilities should be compensated," Pargal, who is also author of the report, said.
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