Amartya Sen wrote about the Indian tradition of skepticism and heterodoxy of opinion that led to high levels of intellectual argument. The power sector in India is a victim of this tradition at its worst. Instead of forcefully communicating, supporting and honestly and firmly implementing policies, people just debate them. It is argued that central undertakings produce power at lower tariffs and must therefore, build most of the required extra capacities. This is a delusion. They no longer have access to low-cost government funds.
Uncertainty about payment remains a reason for the hesitation of private investment. They had to sell only to SEBs (State Electricity Boards). SEB balance sheets are cleaner after the “securitisation” of the Rs. 40,000 crore or so owed by SEBs to central government undertakings, now shown as debt instruments. But, state governments have not implemented agreed plans to ensure repayment when due. The current annual losses of around Rs. 28,000 crore make repayment highly uncertain. The central undertakings that are their main suppliers have payment security because the government will come to their help. Private enterprises do not have such assurance and are concerned about payment security, that must be resolved.
By the late 1990s, improving the SEB finances was recognised as fundamental to power reform. Unbundling SEBs, working under corporate discipline and even privatisation and not vertically integrated state enterprises, are necessary for efficient and financially viable electricity enterprises. Since the government will not distance itself from managing them, privatising is an option. The Delhi model has worked. But, it receives no public support.
The Electricity Act 2003, the APRDP (Accelerated Power Reform and Development Programme) with its incentives and penalties, and the creation of independent regulatory commissions, were the means to bring about reforms to improve financial viability of power sector. Implementation has been half-hearted and results disappointing. The concurrent nature of electricity in the Constitution impedes power sector improvement. States are more responsive to populist pressures than the central government, and less inclined to take drastic action against electricity thieves.
Captive power would add significantly to capacity. However, captive generation, three years after the Act enabled it, has added little to capacity because rules for open access were delayed. Redefined captive generation avoids state vetoes on purchase or sale of electricity except to state electricity enterprises. Mandating open access on state-owned wires to power regardless of ownership and customer would encourage electricity trading. The Act recognised electricity trading as a separate activity. A surcharge on transmission charges will pay for cross-subsidies. These were to be eliminated in time. Rules for open access and quantucom of surcharge by each state commission (under broad principles defined by the central commission) have yet to be announced by some. The few who have announced the surcharge have kept it so high that no trading can take place.
1. Why are the Central undertakings not capable of generating power at low cost?
2. Which of the following should be the SECOND sentence?
3. What serious drawback of the states is pointed out by the author of the passage?
4. Why were the results of the power sector reforms NOT anticipated?
5. Choose the word or group of words which is most nearly the same in meaning to the given word.
Viability
6. Which of the following was NOT considered as the instrument to accomplish financial well-being of the power sector?
Uncertainty about payment remains a reason for the hesitation of private investment. They had to sell only to SEBs (State Electricity Boards). SEB balance sheets are cleaner after the “securitisation” of the Rs. 40,000 crore or so owed by SEBs to central government undertakings, now shown as debt instruments. But, state governments have not implemented agreed plans to ensure repayment when due. The current annual losses of around Rs. 28,000 crore make repayment highly uncertain. The central undertakings that are their main suppliers have payment security because the government will come to their help. Private enterprises do not have such assurance and are concerned about payment security, that must be resolved.
By the late 1990s, improving the SEB finances was recognised as fundamental to power reform. Unbundling SEBs, working under corporate discipline and even privatisation and not vertically integrated state enterprises, are necessary for efficient and financially viable electricity enterprises. Since the government will not distance itself from managing them, privatising is an option. The Delhi model has worked. But, it receives no public support.
The Electricity Act 2003, the APRDP (Accelerated Power Reform and Development Programme) with its incentives and penalties, and the creation of independent regulatory commissions, were the means to bring about reforms to improve financial viability of power sector. Implementation has been half-hearted and results disappointing. The concurrent nature of electricity in the Constitution impedes power sector improvement. States are more responsive to populist pressures than the central government, and less inclined to take drastic action against electricity thieves.
Captive power would add significantly to capacity. However, captive generation, three years after the Act enabled it, has added little to capacity because rules for open access were delayed. Redefined captive generation avoids state vetoes on purchase or sale of electricity except to state electricity enterprises. Mandating open access on state-owned wires to power regardless of ownership and customer would encourage electricity trading. The Act recognised electricity trading as a separate activity. A surcharge on transmission charges will pay for cross-subsidies. These were to be eliminated in time. Rules for open access and quantucom of surcharge by each state commission (under broad principles defined by the central commission) have yet to be announced by some. The few who have announced the surcharge have kept it so high that no trading can take place.
1. Why are the Central undertakings not capable of generating power at low cost?
2. Which of the following should be the SECOND sentence?
3. What serious drawback of the states is pointed out by the author of the passage?
4. Why were the results of the power sector reforms NOT anticipated?
5. Choose the word or group of words which is most nearly the same in meaning to the given word.
Viability
6. Which of the following was NOT considered as the instrument to accomplish financial well-being of the power sector?
Answers & Comments
Answer:
The central undertakings are not capable of generating power at low cost because they no longer have access to low-cost government funds.
They had to sell only to State Electricity Boards (SEBs).
The author points out that states are more responsive to populist pressures and less inclined to take drastic action against electricity thieves.
The results of the power sector reforms were not anticipated because implementation has been half-hearted.
The word most nearly the same in meaning to the word "viability" is "feasibility".
The SECOND sentence was not considered as the instrument to accomplish financial well-being of the power sector.