Power Sector Reforms In

India: A Critical Appraisal Of

Orissa’s Reforms Experience

SARBESH MISHRA, M.Com, M.Phil.

Enrolment No: 6 – Commerce (2003 – 04)
Research Scholar, Dept. of Commerce
Utkal University, Vanivihar
Bhubaneswar – 751 003.

Under the Supervision of

1. Prof. Ambika Prasad Dash, PMI, NTPC Ltd. NOIDA.
2. Dr. Malay Kumar Mohanty, Ravenshaw University.

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About Myself
Name : SARBESH MISHRA

Qualifications I. B.Com (Hons)

II. Post-graduate In Commerce
III. M.Phil In Commerce
IV. Ph.D. (Commerce - Submitted)

Experience I. Lecturer in Commerce(2001–2005)–University of Delhi, Delhi.

II. Lecturer in Senior Scale(2005–2007)–Army Institute of
Management and Technology (AIMT), NOIDA.
III. Assistant Professor(2007 Onwards)–National Institute of
Construction Management and Research (NICMAR), Hyderabad

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 Related to Power Sector
† No power is as costly as no power
Homi J. Bhabha, Father of Indian Nuclear Program
† The most challenging unbundling of all would
be that of the bureaucracy
Sebastian Morris, Editor, India Infrastructure Report
† Considerable increase in the average tariff
without any perceptible improvement in
customer service led to the fall in receivable
collection
Sovan Kanungo,IAS Chairman – Committee of Independent
experts to review the impact of power sector reforms

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Organisation of the study
I. Introduction
II. Power Sector Reforms: A Conceptual
Framework
III. Growth of Power Sector
IV. Power Sector Reforms
V. Restructuring Initiatives In Orissa’s Power
Sector
VI. Socio Economic Impact Assessment of
Power Sector Reforms
VII. Conclusion

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 Preface – A Need For Reforms
1. Electric power is must for social and
economic development.
2. To achieve the economic growth rates
commensurate with developed nations,
infrastructure holds the key.
3. Power is an indispensable unit of
infrastructure.
4. Inadequate growth of power sector has led
to the situation of serious consequential
mismatches both in quantitative terms an
qualitative aspects.

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 Contd….
5. In 50 years of existence of state electricity
boards, annual cumulative losses exceeding
Rs. 1,00,000 crores
6. The process of distribution reforms started in
1991 with the amendments in Electricity
Supplies Act. 1948.
7. Orissa is the first state to reform its electricity
industry with the passing of Orissa Electricity
Reforms Act. 1995, came into force on 1st.
April 1996.

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Significance of the Study
1. Highlights the extent of the reforms in
power sector commenced since September
1991.
2. Systematically studies the experience of
Orissa in the post reforms period and its
problem over these period.
3. This research may work as tool for other
states to take the initiative minus the
Orissa experience.

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Objective of the Study
1. To study the government initiatives in
making power sector more promising
2. To systematically analyze the reasons of
Orissa’s failure to become a commercially
viable corporation upto FY 2004 – 05
3. To verify the creditworthiness of power
sector and if it is capable of funding future
investment needs
4. To study the reasons for insignificant
participation of private sector in power
production
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Contd….
5. To make inter state comparison of
efficiency
6. To suggest alternatives to increase the
cash flow without tariff hike
7. To examine the existing laws prevailing in
different states to curb the menace of power
theft
8. To check the extent of progress made in
rural electrification
9. To study the socio economic impact
assessment of power sector reforms
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Hypotheses
1. To study if the power sector reforms
have brought the commercial viability
2. To study if the power sector reforms
resulted in the supply of power at
reasonable and affordable rate
3. To study if the power sector reforms
have brought in fiscal discipline
4. To check if the introduction of OERC has
led to rationalization of tariff structure
and protected consumer’s interest
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 Methodology
1. A survey of available literature on topic
2. Collection of data
3. Analysis of Published and non-published journals
4. Analysis of primary and secondary data
5. Analysis of circulated questionnaire
6. Classification and tabulation of data
7. Preparation of charts, graphs and schedules for
proper presentation
8. Suggestion and remedial measures for
overcoming the problems faced by the
organization officials and scope for further study
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Initiatives
† Felt that expansion and improvement of
power sector can’t be fully achieved with
public resources alone.
† State Electricity Boards (SEBs) were fast
moving towards bankruptcy.
† Common Minimum National Action Plan for
Power (CMNPP) convened by Prime Minister
provided roadmap for a comprehensive
power sector reforms in the presence of
chief minister of all the states.
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Need for new legislation
† Requirement of harmonizing and rationalizing
the provisions in the existing laws to
- Create competitive environment for benchmark
competition which will result in enhancing
quality and reliability of service to consumer.
- distancing regulatory responsibilities of Govt.
† Reform legislation by several States separately.
† Obviating need for individual States to enact
their own reform laws.
† Requirement of introducing newer concepts like
power trading, open access, Appellate Tribunal
etc.
† Special provision for the Rural areas.

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Salient features of the Electricity Act, 2003
(In force from June 10, 2003)

• Role of Government
• Rural Electrification
• Generation
• Transmission
• Distribution
• Consumer Protection
• Trading / Market Development
• Regulatory Commission / Appellate Tribunal
• Tariff Principles
• CEA
• Measures against Theft of electricity
• Restructuring of SEBs
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Outcome
† Establishment of CERC
† Rationalisation of retail tariff
† Gradual private participation in distribution
† Restructuring and corporatisation of SEBs
† Improvement in PLF
† Compulsory metering for all
† Compulsory energy audit
† Evolvement of national policy on hydro power
development.
† Encouragement for co-generation and captive
generation
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Global Perspective
† Many countries started reforms in the
power sector namely UK, USA, and Latin
American countries like Chile, Argentina,
Peru, Columbia
† They have achieved improvements in
the utility efficiency, reducing tariff and
provided better quality of service to
consumers through competition.
† Restructuring led to the removal of load
shedding, blackouts and high degree of
T&D losses
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 Reforms and Restructuring initiatives
in Orissa’s Power Sector (Sequences)
1993 – Chief Minister announces power reforms plans
1995 – Regulatory reform bill passes legislature
1996 – Orissa Electricity Reforms Act w.e.f. 01/04/1996
1997 – OERC issues first tariff orders
1998 – Establishment of 04 distribution zones as
corporation
2000 – GRIDCO’s financial worsens
2001 – Constitution of Kanungo Committee to examine
reforms process
2002 – Performance of 03 zones of 04 zones worsens
(SOUTHCO being the exception)
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What went wrong
† OERC limited the increase in tariffs against
WB-SAR proposal.
† Assets of GRIDCO were revalued upwardly to
match the increase in liabilities (Rs. 16 billion
approx.)
† OHPC’s tariffs were increased to meet 16%
returns, thus GRIDCO caught between
increasingly expensive generators and non-
paying DISCOMs.
† Inaccurate baseline information for T&D
losses and unrealistic performance targets.

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Contd….
† No budgetary support via subsidies
† Poor collection rates from consumers by
DISCOMs.
† Government did not pay its own dues
for power Rs. 1.5 billion (approximately)
† The single buyer model is not
necessarily the best.

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 Turnaround of GRIDCO
† GRIDCO started power trading with the help of
NVVNL (NTPC Vidyut Vyapar Nigam Ltd.).
† Gradual reduction of T&D losses with billing and
collection efficiency (90%).
† World Bank and DFID came forward with suitable
package to fill in the required revenue gap.
† During first phase of reforms services of
consultant’s were extensively utilised with a cost
of 3060 million rupees, their services were
stopped and fixed tenure based and dedicated
CMD was appointed to oversee the affairs.
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Socio-economic Impact Assessment
of Power Sector Reforms
Impact on Education – Improvement in the
current situation than in the pre-reform period
due to less load shedding
Impact on Health – Timely conduct of diagnostic
tests due to availability of power
Impact on Women – The availability of leisure
time has increased during post-reform period.
Impact on Agriculture – Since the usage of
electricity in Orissa is less so no significant
change was witnessed with power reforms.

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Scopes for further research
1. Single Buyer Vs. Multi Buyer Model
Single buyer model retains the role of
government in the power sector instead of
distancing it. So the research on multi-buyer
model would be an ideal one at this juncture.
2. Scope of FDI in Power Sector
There has been an insignificant flow of FDI in
power sector. A comprehensive research must
be carried out to find the reasons for its failure
and the desired roadmap for its success.

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THANK
YOU
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