Public electricity boards in Kerala and Gujarat: A comparison

Abstract

The state electricity boards have enjoyed virtual monopoly over generation,transmission and distribution of electricity until recently. Absence ofcompetition and mismanagement has resulted in these utilities runninglosses up to billions thus earning a bad repute of inefficiency for the Indianpower sector as a whole. The rate of electrification and the growth ofgeneration capacity has been pathetic in India and one of the main reasonsfor that is that valuable tax money is going into feeding inefficiencies of theelectricity boards rather than expanding their services.However, despite the moribund state that it is in, winds of change isblowing in the Indian power sector. Consequent to the electricity act of2003, the government initiated a slew of reforms in the power sectorbreathing fresh air into it. The act de-licensed generation and ruraldistribution of electricity. The state governments were asked to unbundlethe state electricity boards and introduce competition in generation anddistribution. The act also mandated the setting up of state electricityregulatory commission to oversee the operation of electric utilities in eachstate. The electric utilities now have to submit an annual revenuerequirement (ARR) and tariff revision plan to the regulator and get itapproved. Many states have implemented the provisions of the act andhave successfully commercialized their power sector. However, as in everyother economic aspect, the states differ widely in the amount of reformscarried out and hence in the efficiencies of their respective electric utilities.In this study, therefore, I aim to look into the disparities in the efficiencies ofstate electric utilities and understand the reasons for the stark contrast intheir performances. I intend to compare, in particular, the performances ofKerala State Electricity Board and the state electric utilities in Gujarat.Gujarat has been one of the pioneers in power sector reforms in India andhas fully commercialised electric utilities that submit yearly auditedaccounts. Kerala on the other hand has been lagging behind in theimplementation of reforms due to multiple issues. The lag in reforms isreflected in financials too. While utilities in Gujarat manage to generateprofits, the KSEB has a revenue gap of close to 900 crores, which typicallyis met by the government in the form of subsidies. In this scenario, it mightbe educational to compare the utilities in two states so as to understand thekey areas of KSEB’s underperformance and identify ways to overcomethem. The focus then, of this study is to benchmark the performance ofKSEB against that of the state electric utilities in Gujarat and to identifyreform measures to mitigate them.This report covers the midterm status of the study. Section 1 provides abird’s eye view of the costs and realizations of KSEB and Gujarat state electricity utilities. This section serves as the basis on which rest of thestudy is structured. Based on the comparison of cost and realizationbetween KSEB and GUVNL and its subsidiaries, section two raises a set ofquestions to be explored in greater depth. Section 3 explores one of these,namely the sector-wise consumption of electricity and the respective tariffrates in detail. Finally section 4 outlines the steps to be taken in this study.