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Inter-ministry tiff delays power reform blueprint

Calcutta, Sept. 9: The Deepak Parekh committee, hamstrung by differences between the power and finance ministries, has been unable to suggest ways to revamp power boards and outline reforms tailored to states’ needs.

It was supposed to come up with findings by August 31, but now has time until the end of November. “Because of divergent opinions of the ministries of finance and power, members of the committee have not finished discussions on restructuring and transitional finance of SEBs, and state-specific power sector reforms,” power ministry sources said.

This has upset the power industry, which feels this will set the clock back further on much-needed reforms. “The pace of reforms in the country is not satisfactory. An outline would have helped states to carry out changes in a time-bound manner,” they added.

Among the issues that will require more debate are capital restructuring and structural adjustment financing in a state-specific context. The capital restructuring plan will determine how easily SEBs can raise funds from the markets during the transition period.

The power ministry set up the Parekh committee in July to evolve state-specific reform programmes that would restore and sustain the sector’s financial viability. This would include the question of how effectively funds under Accelerated Power Development Reform Programme (APDRP) and other sources can be invested and how SEBs can be recast with the help of structural-adjustment loans. The objective is to support them in a financial crisis, make them operationally viable and improve their credit ratings.

Besides HDFC chief Parekh, the committee comprises ICICI CEO K.V. Kamath, solicitor general Harish Salve, Tata Sons executive director R. Gopalakrishnan and WBSEB chairman G.D. Gautama, besides others.

Sources said negotiations on deployment of funds provided under the APDRP could take place on Tuesday. The committee feels 50 per cent of the funds under APDRP ought to be linked to achievement of reform milestones by power utilities. That would entail matching rupee-to-rupee grants to be given for reduction in cash losses over the previous year. The amount will be computed after excluding tariff increases and money spent on additional purchase of power.

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