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Why are the UP State Electricity Board employees on strike?

The Uttar Pradesh government wants to trifurcate the loss-making state electricity board. The first company will look after thermal power generation, the second will be responsible for hydro power, while the third company will perform the transmission and distribution function. Employees rightly feel that this is a precursor to privatisation, and that these three companies will at some stage have some amount of private participation.

All state electricity boards have been formed under the Electricity Supply Act, but under the new plan, these proposed companies will conform to Companies Act regulations. While the state government has many a time reiterated its promise of ensuring that no employee loses his job, the 87,380 employees feel that their jobs will not be secure in these companies. While the state government has also said the terms of service of all employees will either remain the same, or even get better, the employees believe their job conditions and compensation will get worse.

While on paper these appear to be the reasons for the standoff, the real reason could be very different. The UPSEB loses 42 per cent of the power it generates to transmission and distribution losses, while the national average of power lost is 21 per cent. True, some amount of power is lost because of technical problems, but a far greater amount is stolen. Something which can't happen without the active connivance of the UPSEB employees. Right now, the UPSEB looks after all three functions: generation, transmission and distribution. This gives corrupt employees from all departments a chance to profit from kickbacks taken at the distribution-end. But once the board is trifurcated, those employed in the generating companies will be out of the kickback loop. So, pure greed could also be a motivator for many strikers.

Why does the UP government want to trifurcate the SEB?

The UPSEB is huge in every sense. In terms of number of employees, it's the third largest SEB with 87,380 employees, has the capacity to generate 4,331 MW of thermal power and 1,605 MW of hydro power. Its inefficiencies are equally large. The board actually generates only 2,400 MW of thermal power, and 700-800 MW of hydro power, giving it a plant load factor of 49 per cent, while the national average is 65 per cent. Thus, it has to buy 1,800 MW of power from the national grid. Then there's power theft.

Not surprisingly, the UPSEB is bankrupt and owes Rs 3,900 crore to the central power utilities. It's true that the subsidy given to agriculture and domestic consumers - for which the government is at fault - has contributed to the mess. But if efficiencies in the SEB were higher, the government could afford to give subsidies to needy sections of the society, without the SEB going bankrupt.

Trifurcating the SEB will ensure greater managerial focus. The technical requirements of thermal power generation, hydro power, and transmission and distribution are very different. They are completely different lines of business, and this division will ensure that operations of the SEB get streamlined. It isn't possible to ensure power reforms without tackling the problem from the distribution-end first. All through the '90s, power planners tried to solve India's electricity problems from the generation-end, and failed miserably. To be able to solve the problem from the distribution-end, the state needs to have a separate distribution company so that greater focus - both in terms of effort and money - can be provided to it.

Are the fears of the SEB employees justified?

While the government has repeatedly said the terms of service of UPSEB employees will remain the same, the workers have some worries. Under a specific exemption granted to SEBs, they are probably the only organisations in India which can use the provident fund money of their employees to fund their business. SEBs have routinely used this money to pay off central power utilities. With the result, there's no provident fund corpus of UPSEB employees. Today, when an employee retires, the board pays him his dues from the revenues it receives. Or, if the UPSEB can't pay, the state government bails it out.

Employees worry that when the new corporations are formed, how will they get their dues since the UPSEB doesn't have a provident fund corpus? The government intends to create one by infusing huge amounts of money. Currently, the size of the corpus is being assessed. The World Bank and other aid agencies would be willing to fund the state if it can push its power reforms plan. So, the workers really have nothing to worry about.

Orissa State Electricity Board (OSEB) employees had moved court over this. But the court ruled in the state government's favour. Today, Orissa has successfully carried out power sector reforms, and the fears of the employees have proved unfounded.

What has happened in other states that have seen SEB reforms?

Orissa took the initiative in the early '90s. It was a painful process which floundered many a time. But the state finally seems to have got its act together, thanks to a lot of World Bank help. Being the first, it was difficult for Orissa since there were no models to follow. Plus, the OSEB had no employees of its own, they were all state government employees. So, all employees had to first be transfer-red to the OSEB, and then to the companies that were formed. Now Orissa has private participation and efficiencies are higher.

The next states to follow were Andhra Pradesh and Haryana. They have also successfully transferred employees to the new corporations, ensuring that their terms of service remain similar, and there has not been much employee unrest.

Why has this happened in UP?

UP is definitely a more political state, and it was always going to be tougher to implement SEB reforms here. So, the state government needed to build opinion among the employees and the public in favour of its plan. It obviously did not do a very good job of that. AP chief minister Chandrababu Naidu, for instance, managed to carry the 75,000 APSEB employees with him on his power reforms programme. In contrast, not just the employees, even political leaders in UP feel that they have not been taken into confidence on the state government's plans.

What happens if UP gives in?

The strike in UP is a test case for power reforms in India. If the state gives in, Indians can say goodbye to their hopes of solving the country's power crisis. Other states like Rajasthan, Karnataka, Tamil Nadu, Madhya Pradesh and Delhi are also working on relatively similar reform packages. But if the UP government loses this battle, it will embolden SEB employees across all these states, and discourage state governments from taking the difficult decision of reforming the power sector.

For instance, Rajasthan has only recently - and after much political trouble - got legislative clearance for its reforms. The state, along with MP, is expected to be next in line for reform. It's now that our planners have realised that only if you can ensure that consumers pay for the power they consume, and thefts and distribution losses come down, will investors enter the sector. If UP surrenders, India will head only one way: towards a blackout.