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FEB 25 2015

Keep power utilities away from politics: World Bank report

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 25th FEB 2015

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 Central Government, recommends freeing state utilities and regulators from political interference, increasing accountability and enhancing competition in the sector.

The study called for a transition from administratively run to commercial 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.

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

 

Financial health

The report said the financial health of the sector was fragile and the total accumulated loss was at Rs. 2.88 lakh crore or three per cent of GDP in 2013.

ver the last two decades, the sector required periodic rescues from the Central Government. A bailout of Rs. 35,000 crore in 2001 was followed by a restructuring package of Rs. 1.9 lakh crore in 2012.

Among key recommendations, the report said banks/ lenders should hold utilities accountable for efficient operation and apply collective pressure to not lend to those not credit worthy

The central government should pledge no 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 are going to intended recipients.

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