SEBs: Will they ever see black? - Views on News from Equitymaster

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SEBs: Will they ever see black?

May 26, 2000

The financial health of the State Electricity Boards (SEBs) has always defined the pace of the power sector reforms. Guarantees, counter-guarantees, escrows and securitisation are all the offshoots of the poor financial position of the SEBs. Everybody agrees that SEBs have always had to operate with the dice loaded against them. The government subsidised power tariffs for agriculture, which virtually meant that they were in loss from day one. No profits meant no development of infrastructure, no improvement in plant load factors (PLFs).

No development in infrastructure meant high transmission and distribution (T&D) losses. Compared to world average of around 12-15% in T&D losses most SEBs clock T&D losses in excess of 25%. This is just the tip of the iceberg. Orissa, which is one of the first states to start privatisation of its SEB clocked on an average a shocking 51% as T&D losses. Karnataka electricity board recently estimated its T&D losses to be around 37-42%.

A large part of these T&D losses stem from lack of proper billing infrastructure, encouraging pilferage of electricity. India is probably the only country in the world, which wastes more electricity than it consumes.

The SEBs seem to be caught in a vicious circle. They cant charge what they should, but have to improve. Should the tariffs be raised first, or the efficiency of the SEBs improved? Given the political nature of the issue, expect the pathetic state to last longer.

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