Whom Dismantling Of Bihar Electricity Board Benefits

Amarendra Mishra

A MEMORANDUM of Understanding (MoU) signed between the Bihar and the central governments declares that electricity would be made available in all the villages of Bihar by 2006. The consumers would be guaranteed uninterrupted and good-quality power at affordable rates. A state electricity regulatory commission would be set up in order to decide affordable rates and in order to achieve these objectives the electricity board would be split up into three profit centres for  generation, transmission and  distribution and these would be run on commercial lines in such a way that capital investment may be attracted to fulfil the demand of power.

There is no dispute as far as the objectives are concerned. But what remains to be seen is whether these objectives can be achieved by trifurcation of the  electricity board and  whether the objectives set out in the MoU would include the objectives for which the  electricity board was set up.

ATTEMPT TO LOOT THE PEOPLE

The generation and other costs of electricity together come to Rs 5 per unit. The electricity purchased from the NTPC and others sources  costs Rs 2 per unit and the Transmission Corporation of the government of  India charges 35 paise on this as transmission cost. Now, if 20 per cent maintenance and establishment cost, 20 per cent technical cost,  20 per cent cost of electricity supplied at times when it is not required and thus destroyed and 8 per cent depreciation charges are added to the cost  of electricity acquired from outside then the cost comes to Rs 4.18 per unit.  The average cost of production of electricity generated from internal resources is Rs 5 per unit. The average of  the electricity generated from its own resources and that acquired from outside comes to about Rs 4.59. It must be remembered that any company, whether in private or in government sector, would not provide electricity at prices lower than the production cost. Now, if each of the three profit centres is guaranteed a minimum 16 per cent profit, the electricity charges would be Rs 6.79 per unit. The rate at which electricity board is presently providing electricity to the consumers is less than its production cost. When the purchase price of electricity acquired from  external sources and the tariff after profit is compared, it becomes  clear that electricity board is providing electricity to agricultural and domestic consumers at rates lower than its purchase price. It is evident that the agricultural and domestic consumers cannot purchase electricity at high prices which would be determined commercially. Hence use of electricity would be restricted to only a few. For majority of the consumers, the claim of providing uninterrupted high quality electricity to all villages in the state by 2006 is thus meaningless.

It is clear that if electricity is supplied at the rates calculated after accounting for profit, consumption would decline, leading to a fall in the demand for electricity. In such circumstances there would be no need for increased production, nor for increased capital investment. Even otherwise, an analysis of private power projects, including Dabhol, makes it clear that 80 to 90 per cent of the project cost has been provided by the government and public financial institutions. So , the talk of private investment is meaningless. Thus, any of the objectives listed out in the MoU may not be achieved by splitting up the electricity board and forming a company or organisation with a profit motive.

IN THE FOOTSTEPS OF BJP GOVERNMENT

As consumers cannot afford to purchase electricity at increased tariffs, the  government has talked of providing subsidy to the farmers which will amount to Rs 4000 crore. However, the state government presently does not provide even Rs 1000 crore as subsidy. The claim of giving subsidy to farmers is thus misleading and it would become difficult for the ordinary consumers to buy electricity.

 It is indeed surprising that the RJD government of Bihar, which opposes the multinational corporations (MNCs) and also opposes the new economic policies of the central government is becoming a party to the conspiracy of  splitting the electricity board into profit making companies and finally handing  them over to the MNCs.

RELEVANCE OF ELECTRICITY BOARD

The electricity board was set-up under Section 5 of the Electricity Supply Act 1948. The preface states:  "It is essential for the development of power that it is expanded to semi-urban and rural areas and in order to achieve this it is necessary to end the different systems under Cantonment Boards,  Municipality and Notified Area Committee and develop a self regulatory and semi-commercial institution like electricity board.”

 It is interesting that the MoU talks of achieving an objective which has already been achieved with  the initiative of the electricity board. Electricity is presently provided to 47,000 villages and 17,000 Harijan bastis. Apart from this,  electricity has also been provided to 2,73,261 pump sets and that too at 20 paise per unit, that is almost free. As a result, Bihar has not only become self-sufficient in foodgrains but is also in a position to export them. Moreover, the massive progress has been achieved in expansion of power and production despite the extremely low electricity tariff.

BOARD NOT RESPONSIBLE   FOR DEFICIT

The allegation that the board is responsible for its deficit is actually not true. It is well known that electricity procured from NTPC and other sources is being supplied at less than the procurement rate of Rs 2.35 per unit that is at 29 paise per unit for agriculture and Rs 1.80 (upto 100 units) for domestic consumers. And this is decided on government directives. So, if the electricity board is in a deficit, it is because of the government policy, the board cannot be blamed for the losses.

The electricity board was set-up in 1958 with a loan capital of Rs 14 crore, but the assets of the board were valued in 2000 at Rs 464.1 crore after accounting for depreciation. This  valuation is based on the value of land or  building at the time of purchase. It is to be remembered that the value of land has greatly appreciated during this period and if  it is assumed that it has increased three time only,  then Board's assets would soar to Rs 1392.9 crore. However, the market value of these assets is about Rs 30,000 crore. Besides, about Rs 5000 crore are due from the consumers which includes Rs 3500 crore due from the government and its institutions.  The amount of Rs 629 crore is  due from the government under the provisions of the Electricity Supply Act for making up its losses. Thus it is evident that the board is really not in a loss, as is being propagated.

The preface of  Electricity  Supply Act 1948 and Section 49 also specify the fixing of electricity tariff. Section 59 includes the condition that while fixing the tariff, the state government would take into account losses of the board. Section 66 (A) talks of the conversion of loans into capital.  Section 67 (A) provides for payment of the interest only after providing for all losses. Other sections provide for budget of the board,  financial accounts, etc, to be placed before the Vidhan Sabha and Vidhan Parishad. The provision for working under the directive of the government and the use of the term  'semi-  commercial'  naturally explains that the electricity board  was set-up with the consideration that electricity is essential for  modern life. Thus the crux of the issue is to provide electricity as  public utility service and at  nominal rates  and develop it as  self- regulatory institution under  the government. So  those  who talk of profit  and loss forget the preface and other provisions of the Electricity Supply Act. The expectation of profit from an organisation, which was never meant to earn profit, is  nothing but deceit.

REASON FOR SUCCESS IN KOLKATA & MUMBAI

As it is a basic highly capital intensive industry with scope for immense profit and as it can be  used for extending  control over  other  industries, MNCs have been eyeing this industry and, on the directives of the World Bank and IMF, the central government led by the BJP is bent on selling the public sector undertakings to these companies. This despite the fact that such an experiment has failed in Orissa, and the game of Enron in Dabhol has been exposed.

The actual situation in Mumbai and Kolkata is not being placed before the masses, which are being cited as success stories to make opinion in favour of  privatisation of the  Bihar state electricity board. It must  be  remembered that there is a single controlling authority for distribution, transmission and generation in these cities. It is noteworthy that both the companies are provided cheap power in comparison to our electricity board and, because of the Board being there in existence in these metropolitan cities, these companies cannot raise the tariffs of power arbitrarily. But the company to be formed in  Bihar would not  get  cheap power and, because of dismantling of the electricity  board,  there would be  no  regulation also.