Power House In Order

Orissa, with a stigma of backwardness, was the most unlikely candidate to undertake one of the most revolutionary reforms in power sector. Explains N.M. Mishra, project manager, Orissa Electricity Regulation Commission (OERC): "During 1991-92, the state faced an acute shortage of power — almost 1,000 MW. That was also the time when the government decided to invite and encourage the private sector to participate in the industrial development of the state. We approached the World Bank who promised to help us with international consultants and other facilities if the government was serious."

 In November 1993, the state government took a policy decision to restructure the power sector and appointed Standing Committees with nine different working groups focusing on specific areas of concern. In August 1994, four international consultants—KPMG Peat Marwick, UK, McKenna & Co, London, N.E.R.A., Washington and Monenco AGRA, Canada—were appointed. Based on their recommendations, the vertical integration system of the power sector was broken up. Solution: to divide OSEB into smaller organisations and privatise new corporations.

The reforms finally took off when the Orissa Electricity Reform Act of 1995 was amended an Before industrial development, Orissa spruces up its power sector THAT industrial development is impossible without adequate power supply is axiomatic. Apart from generation of power, its distribution to the industrial units is no less important. And that is the catch. The Orissa State Electricity Board (OSEB), responsible for transmission of power, has accumulated a combined loss of over Rs 7,000 crore, thanks to financial and administrative mismanagement.

Orissa, with a stigma of backwardness, was the most unlikely candidate to undertake one of the most revolutionary reforms in the power sector. Explains N.M. Mishra, project manager, Orissa Electricity Regulation Commission (OERC): "During 1991-92, the state faced an acute shortage of power—almost 1,000 MW. That was also the time when the government decided to invite and encourage the private sector to participate in the industrial development of the state. We approached the World Bank who promised to help us with international consultants and other facilities if the government was serious."

d ratified in January this year. First, a quasi-judicial body, OERC, was set up to mediate in disputes and provide a level playing field which would have the ultimate responsibility in fixing up power tariffs. Then the generation of power was divided into three separate segments: Orissa Power Generation Corporation (OPGC) was set up with Rs 450 crore equity and Rs 550 crore state loans. The state will later disinvest 25 per cent of its equity. The thermal power plants of OSEB was transferred to OPGC. All the hydel projects of the state was transferred to another company, Orissa Hydro Power Corporation (OHPC), set up with Rs 766 crore state loans. The third segment will include all the private companies generating power. All these three power generating units

will sell power to yet another newly formed organisation, GRIDCO, set up with Rs 253 crore equity and Rs 400 crore state loans which will later be privatised. And GRIDCO, in turn, will sell power to distribution companies. The entire state has been divided into four distribution zones. Says Mishra: "For the central zone that includes the state capital, Bhubaneswar, negotiations for the distribution operation agreement (DOA) is almost complete with Bombay-based BSES Ltd." According to sources in the power sector, BSES is insisting on total autonomy and control over the distribution staff and the right to disciplinary action. The workers are resisting the state government's move towards privatisation. However, it will be some time before Orissa emerges as a major power seller. "Power is one commodity that you can't store. It has to be distributed immediately. Unless the national grid is streamlined, it makes little sense to generate too much of surplus power," says Mishra. The other SEBs will also have to strengthen their grids and finances. The state has, therefore, scaled down its original power plans. While the AES Transpower project has been cleared, other power purchase agreements for the Duburi, Bomlai and Lapanga projects have been put on hold for international bidding. The state government is also carrying on negotiations with the Hong Kong-based Hopewell Holdings which is planning a thermal unit. The state has also been promised loans from several international bodies. The World Bank is extending $350 million, while UK's Overseas Development Agency and the Union government have also granted loans to the state government.

Chief Minister J.B. Patnaik is hopeful that that one-sixth of the country's additional power requirement of 43,000 MW by the turn of the century can be met by Orissa. He told a press conference recently: "By the year 2000, Orissa will become the powerhouse of the country."