CENTRE’S ILL-MOTIVATED INSISTENCE

REPORT ON Date: 27-09-2008

Central Government’s private profit-motivated insistence on the diktat to divide Kerala State Electricity Board into four separate bodies does not consider the heavy financial burden, the regress in power transmission, the increasing inefficiency in collecting electricity charges, increase in the cost of power production per unit even in hydropower, the steady increase in electricity charges year after year and the accumulating revenue loss in States like Orissa which restructured their electricity boards. The national and multinational companies, which entered the field of power distribution, did neither invest capital for inducing development nor show better management expertise.

When an electricity board is turned into different companies thousands of crores of rupees will be required for discharging the benefits of employees all at once. Private capital including world financial institutions will now step in, resulting in the fleecing of the consumers. Electricity will then become a commodity rather than an infrastructure facility for development. So it is undesirable from all points of view to divide the State Electricity Board into different companies.

The main agenda the UPA Government at the Centre has been pursuing is to privatise the public sector by all means or if not possible, to destabilise it. The Central Government would like to suppress the defenses built up by the State Government within the ambit of their limited power against, this privatisation and distabilisation agenda.

Nobody in Kerala wants to break KSEB, the biggest public sector organisation in Kerala into different companies and subsequently privatise them. The people of Kerala think that such actions will be harmful to the State and will be against its interests. It is understood that the opposition in Kerala and the trade unions connected with them are against centre’s fiat that the Board should be divided into separate companies. But the Centre is of the standpoint that the companies should be formed, regardless of all opposition and the State would not be given even two months’ time for it. It only means KSEB in its present form must not be there beyond September 24, 2008.

A beginning of the neo liberal reforms in power sector was begun with the 1991 amendments to the Indian Electricity Act 1910, Electricity Supply Act (1948) etc. Along with this the division of electricity boards and their reorganisation was also begun. Privatisation of electricity generation, transmission and distribution is also aimed at in the reorganisation. Electricity Bill was passed and it became an Act. It came into force from June 10, 2003. The Electricity (supply) Act 1948 on the basis of which Electricity Boards were formed and sustained became inoperative from that date. So, Electricity Board became a non-entity from that date. As per the new Act one or more companies can be formed in the place of the Board. The Act stipulates that the company for the transmission of electricity must be in the public sector. The other companies can be in the public or private sector. It is also stipulated that the transmission company must not be engaged in sale of power. The Act provides for an interim arrangement until alternative system to the Electricity Boards is evolved. The Act has given the facility to the Electricity Board to function as State transmission utility and licensee for transmission and distribution. But the Act sets out a time limit for the interim arrangement. This was till June 4, 2004. But this time limit can be extended with a mutual understanding between the Centre and the State. This time limit was given for Kerala till September9, 2008. After much pressure this was extended to another 15 days.

There were 21 Electricity Boards and 9 Electricity Departments including that of Pondicherry in the country. Till date 13 electricity boards and one Department were reorganised. In Tripura Electricity Department was reorganised into a single company engaged in production, transmission and distribution. Reliance, Tata and AES companies were given the job of distributing electricity in Orissa and Delhi. The distribution of electricity in the industrial city of Noida in UP was entrusted with the R.P. Goenka Group. However, the pace of reorganisation and privatisation were slackened in the wake of the protests and struggle against this World Bank model reform including the privatisation in the power sector in the country as a whole and in Punjab, Andhra Pradesh, UP and Maharashtra in particular. Left parties, the employees of Electricity Boards and engineers led this struggle. Subsequently well-known technologists, economists and voluntary organisations joined this struggle. There was 11 day strike in UP in 2000. This was followed by a strike at the national level. Police lathicharged and shot at the protestors in Andhra Pradesh resulting in the death of three persons.

Central Government and organisations made comprehensive studies with the participation of experts about reorganisation. The study revealed that there was better work sustainability and efficiency in the sector where all activities were discharged by a single company compared to States where the functions were divided among different companies.

The subsidy given to Electricity Boards after their reorganisation into different companies rose steeply in Haryana, Karnataka, Rajastan Madhya Pradesh and Uttar Pradesh. Huge subsidy is given by Andhra Pradesh even now. The expenditure needed for reorganisation in Haryaana, Madhya Pradesh and Rajastan was enormous. West Bengal had to write off an amount of Rs. 9806 crores due from the State Electricity Board on revenue advance and cost of fuel. Rajasthan Government has declared that it will give an additional amount of Rs. 8400 crore as aid to electricity companies before 2011. The foreign consultancy companies engaged for reorganisation in Rajasthan fleeced Rs. 300 crores. The amounts earmarked for consultancy in Andhra Pradesh was 32 million dollars and in UP 8 million dollars.

The report submitted by the committee under Sovan Kanugo (ex. Chief Secratary) entrusted by Government to study and report on the results of reorganisation must be a lesson for all States. Look at the conclusions of the Kanugo Committee.

Transmission loss still stands at 45 percent; it could not be reduced (2) the efficiency to realise current charges came down from 84 percent to 77 percent. (3) The debt burden of distribution company Gridco’ increased from Rs. 820 crores to Rs. 3300 crores. (4) The cost of hydroelectric power generation rose from 20 paise to 50 paise per unit. The electricity charges increased at the rate of 15 percent in the subsequent nine years.

The national and multinational companies in the distribution sector did not make any-capital investment in the sector for development nor could show any management expertise.

Reorganisation has yet to be carried out in Kerala, Tamil Nadu, Panjab, Himachal Pradesh, Jharkhand, Jhattisghad and Meghalaya. Thousands of crores of rupees will be required for discharging existing liabilities for maintaining the level of pension benefits etc. at the time of reorganisation. It is at this juncture that multinational agencies enter the scene with promises of loans and attached conditions.

This will result in relentless fleecing of consumers for more and more profit by private capital monopoly who will change electricity from being an infrastructure facility for development into a commodity for sale and profiteering. So it is inevitable to keep power industry in the public sector in order to provide electricity to the people at moderate rate and to make use of electricity as an infrastructure facility for development. Electricity cannot be produced and kept like commodities. Since generation, transmission distribution and consumption of electricity are taking place simultaneously the process of unifying these activities is inevitable. Managing these functions in separate compartments will increase expenditure and reduce efficiency. So the division of Electricity Board into different companies is not at all desirable.

But all this is no matter for the Centre to mull over - their ultimate goal is the destruction of public sector. Central Government is carrying on with the measures of selling off to private capital the public sector companies, which stood as the bulwark of our economic system without being swayed by the ups and downs of stock markets and achieving development through self-reliance. The Centre tried to sell off even the navaratna companies. Of late there were efforts to hand over to private hands National Aluminium company at Anpara in UP and the Neyveli Lignite Corporation. The stiff resistance of the LDF during the days of its support to the UPA Government could curtail the pace of the Government in privatising them. Now the Centre is speeding up the neo-lilberal polices finding that it has overcome the bind in the Parliament regarding the civil nuclear deal. They are going ahead with the privatisation efforts in the insurance sector. The diktat to split up KSEB into different companies is a part of this move. They are engaged in secret parleys to divide KSEB into companies as they did in Delhi and Orissa and to place them under American Electric Corporation, Ambanis, and Tatas etc. The Centre is not ready to accept that the Indian economy could stand up against the Global and American financial crunch because of the strong wicket the public sector industry in Kerala enjoy. In the latest Planning Commission meeting it was decided to accelerate privatisation and foreign share capital deposit.

The Planning Commission has stressed the importance of privatisation in energy sector and the fixation of electricity charge on the basics of market conditions. It means that power connection to the houses of common people will soon be snapped. The Centre is readying for subjugating energy sector to American monopoly. The assurance to purchase ten nuclear reactors from America paying Rs. 2.8 lakh crores even before the signing of nuclear deal is proof enough.