New Delhi, Feb. 1: Prime Minister Manmohan Singh will convene a meeting of state chief ministers within two weeks to discuss power sector reforms that will include increasing the generation capacity by 1,50,000 mw in the next seven years.

“We have to increase the generation capacity by 1,50,000 mw in the next seven years. We have to improve distribution and transmission also and that will require a heavy investment,” Singh said today.

Talking about free power being offered in some states, he said, “I have made myself very clear that all public utilities have to be priced properly taking into account the paying capacity of users.”

While favouring user charges, he said it does not mean that the scope of power subsidies does not exist. However, offering free power deviates from efficient pricing of power, he added.

The Prime Minister is concerned about the country’s power sector, which is plagued by capacity shortages. This results in frequent blackouts and poor reliability. Shortage of power supply is a serious constraint for industries.

As the Centre and states constitutionally share the responsibility of electricity supply, the Union government is keen on improving the supply, consumption and pricing of electricity.

However, this can only be achieved by reforming the management of the power sector and financing at the state level.

The states have been doling out free electricity under populist pressures. Even Congress-ruled states like Punjab have refused to respond to the Prime Minister’s advice of not giving free power to farmers and introducing a more rational pricing system.

The power sector suffers from poor operational efficiency of state electricity boards (SEBs), which form the foundation of the country’s power system.

Due to subsidised tariffs to residential and agricultural consumers, low investment in transmission and distribution systems, inadequate maintenance, and high levels of distribution losses, theft and uncollected bills, the state electricity boards are continually in financial distress and have been unable to provide quality supply and efficient service to customers.

In most states, the power sector is a major drain on already limited state budgets.

The sector’s heavy reliance on tight state budget resources has been the key obstacle to providing electricity to more users and upgrading systems.

SEB losses and power subsidies are also a major drain on state budgets. Power sector reforms are critical for states’ economic growth and thereby increasing the public spending in priority areas.

The financial weakness of SEBs has also been a stumbling block in achieving the financial closure of independent power producers.

As a result, the government’s steps to introduce private sector investment into power generation has not made much headway.