MSEB: Is the turnaround going to last? (16 December 2001)
In 1994, when the controversial Enron Corporation began to negotiate the Dabhol power project, the Maharashtra State Electricity Board (MSEB) was among the few profitable power utilities in the country. In fact, Maharashtra itself was then the most prosperous and well-administered Indian State. In the next seven years Maharashtra as well as the MSEB sank rapidly into the red and were on the verge of bankruptcy.
However, while the government finances continue to stagger, there has been a significant improvement in the performance of MSEB. This turnaround has been largely overshadowed by the avalanche of bad publicity surrounding the Dabhol Power Company (DPC) and the impact of hits high cost electricity on MSEB’s finances. The cancellation of the controversial DPC deal has only worsened the situation. But if one keeps aside the expensive DPC project and its implications, then MSEB has indeed notched up a creditable performance in the last year —a performance, which indicates that without political interference, the organisation could easily achieve a dramatic turnaround over time.
Here are some numbers: MSEB’s revenues have jumped from Rs 10,626 crores in FY 2000 to Rs 11,689 crores in FY 2001. This has been achieved through cost cutting, curbing theft and misappropriation, efficient metering, reduction in administrative expenses and disciplinary action against employees and consumers. In March 2000, MSEB was weighed down by arrears of Rs 4,500 crores which were up 50 per cent from the previous year (which was in turn were 44 per cent higher than the arrears in 1998). But by March 2001, MSEB has been able to halt the growth in arrears and fix it at Rs 4,500 crores (on a like to like basis after excluding arrears that it expects to collect from the Tatas, Mula Pravara distribution zone and Inter state supply). In residential, commercial and industrial areas where MSEB faces less political interference, it has been able to reduce arrears by as much as 13 per cent.
This has been achieved through a combination of punitive actions such as daily disconnections, improved billing and stringent action against its own staff involved in theft and misappropriation. As many as 181 employees have been suspended and action has been initiated against 646 staffers, sending the appropriate signals to consumers who were in cahoots with them. At another level the MSEB, like other electricity boards, has attempted to correct distortions and falsehoods in reporting the true demand-supply position. In line with the lower demand estimation, it has scrapped several large power generation projects that were being pushed by the Shiv Sena-BJP government by exaggerating future demand.
Among the projects that were axed are— the second BSES project at Saphale, which was cleared on the eve of the last assembly elections, the 447 MW Reliance project at Patalganga and the 1,082 MW Bhadravati project by the Ispat Group. MSEB has now projected its installed capacity requirement at 19,169 MW next year with current availability at around 15,000 MW.
While MSEB continues to suffer from power shortages, it claims that it has no base load shortage even after scrapping DPC’s 740 MW phase I contract. It now estimates that line losses in Maharashtra are comparable o other States such as Orissa, Andhra Pradesh and Harayana, if one excludes Mumbai, which operates like an island of efficiency mainly because of the Tata Power. MSEB claims to have reduced line losses and estimates them at 39 per cent in 2001, of which roughly half, it says, are technical losses. It is fixing these by increased metering, reducing theft and distortions in consumption and billing. It has also improved its power generation to a high of 45,930 MW in FY 2001, plant availability increased to 86.1 percent and Plant Load Factor (PLF) was up one percent to 72.8. The improved efficiency is obvious in the halving of load shedding during the first 10 months of this year.
Clearly if it is allowed a free hand MSEB can improve its performance even further through better efficiency. So what is holding it back? Political interference. Almost every aspect of its functioning from equipment purchase to recovering arrears, is fraught with interference and corruption. The simplest example is billing of consumers. Although Maharashtra is among the most industrialised of States, the metering of electricity supply is only 45 per cent of energy input.
The State used to purchase just around four lakh meters per year as compared to around 20 lakh meters installed by States such as Tamil Nadu and Andhra Pradesh. This reluctance to bill efficiently is being corrected through the purchase of 20 lakh meters. At present, unmetered electricity is supplied to power looms, public water works and around 19 lakh agricultural pumps. MSEB is attempting to encourage the use of meters by making metered tariffs more attractive than flat rates. At a recent meeting with the Chief Minister, the MSEB top brass is understood to have made a detailed presentation on how to make the organisation more efficient. It has suggested a series of reforms to reduce theft and transmission losses and to improve realisation. Many of these are in line with the Memorandum of Understanding signed with government. It also claims to have reduced administrative costs by as much as Rs 200 crore by not filling 13,000 posts and reducing payment of overtime. Does this mean that MSEB is on the road to real recovery? The unfortunate answer is, not necessarily. Its future depends on a proper resolution of the DPC imbroglio.
MSEB’s performance owes a lot to the present Chairman Vinay Bansal and his team. Sources say that the only reason that Bansal has lasted this long is because the government was clueless about how to handle the DPC mess. With the State being bankrupt and DPC threatening termination and arbitration proceeding with a colossal potential liability Bansal seemed the best bet to handle the hot potato, not because he is leading an effective team. With Enron going up in flames, a lot depends on whether the DPC project can be pushed to the centre. But even before the negotiations are complete the pressure for change at MSEB has increased and it may not be long before MSEB’s downhill journey resumes again.