Government of Maharashtra

 

Maharashtra Power Sector Reforms

 

White Paper

 

 

 

˜

 

 

 

 

Industries, Energy & Labour Department

Mantralaya, Mumbai 400 032.

28th August, 2002

                                                                         

 

 

 

 

 

TABLE OF CONTENTS

 

 

1.         Introduction                                                                                           Page 3

2.         Performance of Power Sector in Maharashtra                                        Page 3

3.         The Need for Reform                                                                            Page 6

4.         Participatory process leading to preparation of White Paper                     Page 7

5.         Lessons from reform in other States                                                       Page 8

6.         Elements of Reform                                                                              Page 9

7.         Key milestones                                                                                      Page 14

8.         Conclusion                                                                                            Page 15
1.         Introduction

Maharashtra is the second-most populous State in India. The State has succeeded in achieving high levels of industrialization and has been identified as the country’s industrial powerhouse. With less than 10 percent of population of the country, the State accounts for one-fourth of the gross value added by India’s industrial sector. Upto the 1990s, the State experienced a high growth rate. However, the State has seen a decline in growth rates in recent years. The average annual economic growth has declined sharply from 7.8% between 1985-86 and 1994-95 to 5.3% between 1995-96 to 1999-00.

The development of infrastructure is an important factor to sustain economic growth in all sectors of the economy. The power sector is the most important constituent of infrastructure. The performance of the power sector directly impacts the overall economy of the State. Economic liberalization in the early 1990s has required industry to be competitive by interalia reducing costs. Since power cost comprises a reasonable part of the total cost, the quality and cost of power is an important factor for industries to be competitive, and for the welfare of all citizens of the State.

2.         Performance of Power Sector in Maharashtra

The power sector in Maharashtra, excluding Mumbai, is served by Maharashtra State Electricity Board (MSEB). The Mumbai area is served by three power utilities – Tata Power Company Ltd., BSES Ltd. and BEST. MSEB has an installed capacity of 9771 MW, while Tata Power Company Ltd. and BSES have an installed capacity of 1774 MW and 500 MW respectively. Maharashtra has a share of 2375 MW from Central generating sources. In addition, captive generating capacity in the State is currently 641 MW. In terms of fuel mix (excluding captive), thermal, hydro and nuclear capacities in the State account for 78%, 19% and 3% respectively.

MSEB was set up in 1960 to generate, transmit and distribute power to all consumers in Maharashtra excluding Mumbai. MSEB is the largest SEB in the country. The generation capacity of MSEB has grown from 760 MW in 1960-61 to 9771 MW in 2001-02. The customer base has grown from 1,07,833 in 1960-61 to 1,40,09,089 in 2001-02.

MSEB has a strong generation capacity base. Its generation plants have been receiving awards for achieving high PLFs and other efficiency parameters. In spite of poor quality coal, its thermal power stations achieved an all time high by increasing its power availability to 86.49% and plant load factor to 74.34% in 2001-02. MSEB has developed expertise in project management, planning and in commissioning projects in reasonable time and cost estimates. It was one of the first SEBs to have achieved 100% village electrification. It has the largest Transmission & Distribution (T&D) network in the country with 6.67 lakh ckt kms. The energy sale has grown from 346 MU in 1960-61 to an estimated 37,067 MU in 2001-02. MSEB has been able to meet the base demand through improvement in generation efficiencies and procurement of power. However, the State faces a shortage in meeting peaking requirements.

About 48% of MSEB’s thermal generation capacity is between 15-25 years old and 15% is over 25 years old. This would necessitate significant investments in renovation and modernization of these plants. The LT to HT ratio of transmission lines is about 2 leading to high technical losses. There is need for investing funds estimated at Rs. 18,570 crores over the next 10 years to reduce technical losses, increase coverage of the T&D network, meter all consumers, strengthen rural electrification, expand the HT network coverage and strengthen internal systems.

The predominance of social objectives has led to a lack of commercial orientation in the power sector. Tariffs for domestic, power looms and agricultural segments are lower than the average cost of supply of power, and are subsidized by industrial and commercial consumers. The difference between average cost of supply of power and realization for different consumer segments for the year 2000-01 is shown in the table below:

The gap between average cost of supply and average revenue realization for the years 1999-00 and 2000-01 is shown in the table below.

The distorted tariff structure has led to an increase in high-paying industrial consumers setting up their own captive generating stations which currently have generating capacity of about 641 MW. In addition, NOCs for an additional 1181 MW captive capacity have been given. While consumption of power from the MSEB grid by high-paying industrial consumers has been on the decline, consumption by subsidized consumer categories has grown over the past few years. Further, the low tariff for subsidized consumers has not only led to lower revenues, but also to sub-optimal consumption from these consumers.

The revenue of MSEB increased from Rs. 323 crores in 1960-61 to an estimated Rs. 12,030 crores in 2001-02. However, MSEB has been incurring losses in the past few years. It managed to reduce the loss from Rs. 2842 crores in 2000-01 to an estimated Rs. 308 crores in 2001-02. The reduction in loss was primarily due to reduction in cost of purchase of power amounting to Rs. 1278 crores (for nearly the same quantity of power purchase) and increase in revenues of Rs. 733 crores. The table below shows the trend in MSEB’s worsening financial position over the past five years.

The T&D losses are high at about 39.4%. The loss levels are currently not accurately measurable since only about 85% of consumers are metered. The T&D losses can be categorized as technical losses and commercial losses. Technical losses are due to energy loss in the conductors and equipments used in the system for transmission and distribution of power. The commercial losses are mainly due to theft and defective meters. Guidelines issued by Government of India (GoI) stipulate that T&D losses in each State should not be more than 16%. Every 1% reduction in the T&D loss levels is equivalent to additional revenues of about Rs. 120 crores.

The level of receivables currently is Rs. 7114 crores which is 7 months of sales, the average sales being Rs. 1000 crores per month. An aggregate amount of Rs. 5226 crores (excluding Mula Pravara, Tata & Inter State) has been outstanding for more than 1 year. GoM has been providing loans to MSEB to meet its plan outlay. The loans from GoM have reduced from 38% in 1992-93 to 13% in 2001-02 as a percentage of MSEB’s annual plan outlay. These factors have affected the cash available to MSEB to pay its creditors / suppliers and to make investments in generation, transmission and distribution projects.

To address the aforesaid problems MSEB/GoM have taken several measures. GoM has ensured payment of subsidies to MSEB for targeted consumer segments. MSEB is in the process of securitising the outstanding dues of CPSUs. It is carrying out studies for R&M and life extension programs for some of its existing old thermal plants. It is preparing a capacity addition program. It has identified critical transmission links and transformer capacity requirements. In order to get a better estimate of the T&D losses, MSEB has started energy audit upto division levels and for MIDC areas and express feeders. Of the 7128 feeders of 11 kv and above, 5829 have been metered and the balance 1299 feeders are to be metered by December 2002. It has installed Time of Day meters on all HT consumers and meters on all powerlooms.

3.         Need for Reform

The economic liberalization since the early 1990s has required domestic industry to be globally competitive. Competitively priced and good quality power is essential for industries to be competitive and the economy to prosper. The past 5 years have witnessed a significant growth in captive power plants since the rising cost of power and declining reliability has compelled industry to move away from the MSEB grid. Moreover, technological advances have led to reduced capital costs of setting up smaller captive plants. In addition, there is a need for addressing consumer grievances and resolving complaints within a reasonable time frame.

Despite the efforts of MSEB, there is unmet demand for new connections as well as shortage of power to existing consumers mainly during peak hours. MSEB has estimated that the energy requirement will increase from 59295 MU in 2001-02 to 87262 MU in 2011-12 and peak demand from 9893 MW in 2001-02 to 14104 MW in 2011-12. This would necessitate further investments in generation sector estimated at Rs. 11,905 crores over the next 10 years. In addition, it is essential to modernize and expand the transmission and distribution system. The sector also needs to keep up with technological developments. The total requirement of funds for investments in generation, transmission and distribution is estimated to be Rs. 30,475 crores in the next 10 years.

In view of the financial position of the power sector and to meet the aforesaid investment requirements, GoM and MSEB will have to approach GoI and financial institutions for making available the required funds. Both the GoI and financial institutions have categorically stated that it would not be possible for them to provide substantial funds unless GoM first initiates the reforms necessary for the power sector.

The Government of India has taken several initiatives to evolve a national consensus for reforms in the power sector, especially the transmission and distribution side of the business. Two Chief Ministers’ conferences have been convened in the past few years (latest in March 2001) to urge the States to reform. GoI has come up with the Electricity Bill 2001 which encourages competition in generation and distribution and gives emphasis to reforms. The ongoing APDRP program is an indication that the Government of India is willing to support those States that are serious to undertake reform.

If the current situation is allowed to continue, the investment requirements will increase further leading to declining quality of supply and reluctance on the part of GoI and financial institutions to provide funding to the State. Investments required in generation, transmission and distribution cannot be delayed. Without these investments the power sector will not be able to meet the needs of a competitive economy and will undermine the creation of jobs in the State. While reform can be a difficult path initially, it is necessary in order to enable and accelerate investments, move towards a commercially oriented sector, and improve the quality of service to consumers.

The self sustaining growth of the power sector and its financial viability is essential for the speedy and sustained socio economic development of the State. A healthy power sector would pave the way for further industrialization, growth in agricultural production and economic growth. This would free up resources for the State Government and enable it to focus on addressing the critical social sectors such as education, healthcare and poverty alleviation.

The main objectives of reform are:

Ø      To promote the development of an efficient, commercially viable and competitive power sector.

Ø      To provide reliable quality and uninterrupted supply, at reasonable prices, to all consumer categories.

Ø      To ensure that the social and environmental aspects are fully taken into consideration.

4.         Participatory process leading to preparation of White Paper

As a matter of prudent governance, the GoM has found it necessary to evolve a course of action that is in the larger public interest of the State. In this connection, GoM had constituted the State Electricity Restructuring Committee. GoM also constituted an Energy Review Committee (ERC) in February 2001, to review the power situation in Maharashtra and suggest the broad future course of reforms for the power sector in Maharashtra.

GoM has taken the approach of building consensus for reforms of MSEB, by widely discussing it amongst all stakeholders. As part of this process, GoM has decided to publish this White Paper on the proposed reform in the power sector. For preparation of the White Paper, GoM brought out advertisements in the major newspapers in April 2002 inviting responses on three documents viz. the ERC report, Maharashtra Electricity Reform draft report and the Electricity Bill 2001 (of the GoI) from all the stakeholders comprising industry, employees, consumers and the Maharashtra Electricity Regulatory Commission (MERC). In addition, meetings and presentations were organized in Pune, Nagpur, Nasik, Aurangabad, Amravati and Mumbai by divisional commissioners to present the key features of the above documents and elicit the views from the participants on the reform strategy that should be adopted for the state. In addition to these organized meetings, written responses were received from individuals, agricultural consumers, NGOs and employee unions. Officials of MSEB visited various States which have undertaken reform to study the reform process and have given suggestions. In addition, Minister-Energy has held wide ranging discussions with the officials and unions of MSEB.

Employees and unions of MSEB were opposed to unbundling and/or privatization and stated that full operational autonomy must be given to MSEB and internal reforms should be carried out first. They felt that MSEB’s operations have been adversely affected by political interference in day to day working. The reform model presented by the employees retained the existing identity of MSEB and used the concept of three profit centers of generation, transmission and distribution.

Responses from the industry representation primarily indicated that the competitively priced and good quality power was essential for being globally competitive. It was suggested that MSEB’s monopoly needs to be broken and competition introduced to improve service levels. A majority of responses indicated that unbundling and subsequent privatization of MSEB was essential and should be expedited. It was also suggested that tariff rationalization and transparent subsidy allocation was of utmost importance.

Responses from other consumer organizations, individuals and NGOs broadly indicated that there was a need for reforms and improvement of consumer service standards. Several of the respondents felt that while unbundling, internal reform and granting autonomy to MSEB may be necessary, privatization may not be the solution to the problems of the power sector and should be carried out carefully. Other responses indicated that legal provisions to prevent theft of energy should be strengthened and MIS/billing systems should be improved to be more consumer friendly. 

The different options of reform which were suggested are broadly summarized as follows:

Ø      MSEB to retain its existing identity. The three functions of MSEB viz. generation, transmission and distribution to be run as profit centers.

Ø      Corporatisation of MSEB without unbundling.

Ø      Unbundling and corporatization of unbundled entities of MSEB.

Ø      Unbundling, corporatization of unbundled entities of MSEB followed by privatisation of distribution entity(s).

4.1        Objectives of the White Paper

The White Paper spells out GoM’s strategy for reform in the power sector after taking into account the various options. The reform strategy has been aimed to meet consumer interests while addressing the concerns of the employees. GoM does not intend to totally withdraw from the power sector but aims to bring in efficiencies into the sector to enable it to become self sustaining.

5          Lessons from Reform in Other States

All the States are characterized by more or less similar set of conditions in the power sector. These include high T&D losses, skewed tariffs, poor quality of supply, weak and deteriorating T&D network and rapidly declining capability of State Governments to provide budgetary support to the power sector. There is also reluctance on the part of financial institutions to lend funds without reform.

Some States have recently begun to take serious measures towards reform. Orissa and Delhi are the only two States which have completed the process of unbundling and privatization of their distribution companies. The other states which have commenced reform include Andhra Pradesh, Karnataka, Haryana, Rajasthan, M.P. and U.P. In most States, there has been separation of the generation, transmission and distribution segments of the State Electricity Boards.

The privatization in Orissa has not yielded the desired results as the private sector had to contend with several issues such as – a) low retail tariff not covering costs, b) inaccurate data regarding T&D loss levels, c) the State Government withdrawing from the sector by not providing subsidy during transition period of reform, d) inadequacy of the State Government in providing police support for enforcing collections, e) revaluation of assets prior to privatization leading to increase in bulk supply tariff and f) privatization proceeds not ploughed back to the sector.

In implementing its proposed reform measures, GoM will incorporate the lessons learnt from the Orissa and unfolding Delhi experiences.

6.         Elements of Reform

The reform process will comprise internal reform, an independent regulatory framework and structural changes. The key elements of internal reform are developing human resources, reducing T&D losses, instituting anti theft measures, carrying out energy audit and metering, focus on demand side management and setting up consumer grievance redressal system. A regulatory framework has already been set up and the structural changes proposed are discussed in para 6.3. The proposed Maharashtra Electricity Reform Bill would facilitate the implementation of reforms.

6.1               Internal Reform

6.1.1     Developing human resources

Employees will be encouraged with appropriate incentive schemes along with fixing of responsibilities and accountability. Human development programs and training to improve and update employee skills to enable employees to work efficiently under a commercially oriented work environment will be provided. Improvement in customer service would be a key objective.

GoM will safeguard the interests of the employees of MSEB during the reform process. In the process of unbundling and corporatisation / privatization, the service conditions and benefits currently available to employees will be protected and ensured.

6.1.2     Loss reduction

The target for loss reduction will be 1% per year for technical losses and 3% per year for commercial losses in urban areas. In rural areas, the target for loss reduction will be 0.5% per year for technical losses and 2% per year for commercial losses. The overall target would be to reduce T&D losses to the GoI specified guideline of 16%. The overall collection efficiency will be increased to 94% in two years. Wherever necessary, GoM will compensate MSEB / concerned distribution company for energy supply to urban local bodies, Government departments and other Government agencies.

 

 

6.1.3     Anti-theft measures

Over the years, theft of energy in Maharashtra has been high threatening the very viability of the power sector. It has also resulted in overloading the system causing repeated failures of transformers and equipment. This has translated in deterioration of quality and reliability of supply. Further, honest and law abiding electricity consumers have had to bear additional burden in terms of increased tariff and also bear the inconvenience due to poor quality of supply. Theft of power would become a cognizable offence and necessary legislation for this will be enacted soon.

6.1.4     Energy Audit and Metering

The metering of all consumers in the State will be completed on priority basis. All feeders of 11 kv and above will be metered by December 2002. Metering of all agricultural consumers would be completed by December 2004. 

Energy audits will be carried out to identify areas where there is maximum opportunity to reduce losses and thereby collect more revenue. The monthly energy accounting data detailing the energy input, billed sales and T&D losses will be publicly displayed. It is critical that the requisite baseline data such as category wise consumption levels, T&D losses, quality of receivables and collection efficiency is accurately assessed at zonal/division/subdivision levels.

Wherever feasible, computerized systems will replace non-computerized systems. MSEB is in the process of implementing a comprehensive MIS system which would facilitate the collection / analysis of data which matches the data for cash collections in all areas. This will facilitate the preparation of accounts on a quarterly basis. The MIS system will be completed by April 2004.

6.1.5     Demand side management

The reform process will focus on demand side management with the objective of improving efficiency in end-use of electricity. Focus on demand side management reduces the need for additional generation capacity. Electricity saved is much more than electricity generated particularly considering the added benefits of avoided T&D losses, savings in fuel and the positive impact on environment. MSEB will undertake extensive consumer awareness campaigns on energy conservation measures.

6.1.6     Consumer grievance redressal system

The critical objective of reform is to improve the quality of service. MSEB will further strengthen existing systems to address consumer complaints. A consumer Charter of Rights would be developed within six months to focus on the needs of consumers.

6.2        Independent regulatory framework

The Government of Maharashtra has already set up the MERC under the provisions of the Electricity Regulatory Commissions Act, 1998. MERC has been set up as an autonomous and independent regulatory authority. The Government of Maharashtra is fully committed to take all steps necessary to facilitate and ensure that MERC functions smoothly in an independent manner.

6.2.1     Tariff rationalization

The key element of reform needed in the power sector is tariff rationalization to enable the sector to move towards recovering its average cost of supply. MERC is broadly guided by the following principles while determining tariffs:

  1. Tariffs should progressively reflect the cost of supply.
  2. Consumers’ interests should be safeguarded while reducing the cross subsidies.
  3. Competition, efficiency, and economical use of resources should be encouraged.

The cross subsidy would be phased out over a period of 5 years. GoM recognizes that while there is an urgent need of tariff rationalization, certain poorer sections of consumers would continue to require subsidy for power purchase until their financial position improves. GoM will ensure that subsidies are paid in a timely manner to subsidize those groups of consumers entitled to subsidy for the purchase of power.

GoM / MSEB shall engage in discussions with MERC to adopt a multi-year regulatory approach. A long term multi year tariff policy would give the necessary confidence to potential investors in the power sector. Having a multi year tariff regime where the guidelines, rules and method of determining tariff are well established will also provide GoM an estimate of funding required during the transition period till the sector becomes self sustaining.

6.3        Structural changes

In order to meet the objectives of power sector reform in Maharashtra, MSEB’s operations would need to undergo a structural change. It is evident that MSEB is currently too large an organization which prevents it from functioning efficiently.  A vertically integrated MSEB catering to the diverse needs of a customer base of 140 lakhs which is growing every year has inherent limitations. Organization of the electricity industry into vertically integrated monopolies is no longer necessary in view of technological advances and a reduction in economies of scale.

For the power sector in Maharashtra to be brought on the road to recovery, it is necessary for the various segments in the power business to be run by smaller, more manageable and commercially oriented entities. It is GoM’s view that instead of one monolith in the sector, smaller entities would lead to closer supervision and more efficiency. This would also lead to better customer service. In addition, unbundling is required to make the sector more amenable to competition. The generation business is amenable to competition while the distribution business may be amenable to competition in the future.

While internal reforms are necessary, they would not be sufficient. Despite MSEB having initiated efforts of energy audit, focus on metering and on increasing collections, revenue realization has not shown major improvement. Although MSEB’s efforts would improve the position of electricity supply in certain areas, the overall financial position of MSEB is unlikely to improve sufficiently to generate the funds needed to meet the investments required in the power sector. Further, MSEB will not have access to adequate funds from external sources without undertaking reforms.

MSEB will be restructured in order to promote and encourage efficiency, autonomy and accountability in decision making and functional specialization. GoM proposes, in the next one year, to corporatize MSEB into separate generation, transmission and distribution companies. To ensure managerial and operational autonomy in the new companies, GoM will ensure that the Directors on the Board of the generation, transmission and distribution companies are appointed exclusively on the basis of merit.

6.3.1     Formation of a Trust

There is a need for a separate entity to manage the reform process. The formation of creating an autonomous holding company for this purpose was deliberated. However, it is proposed to create a separate Trust which would be best able to address the required functions in a more transparent manner. The Trust would be managed by a Board of Trustees representing the various stakeholders such as Government, consumers, financial institutions and independent experts. As part of its main function of managing reforms, the Trust would manage the proposed Power Sector Reform Fund discussed in para 6.5, would be responsible for conflict resolution if any between the newly formed generation transmission and distribution companies, monitor the reform process and inform the public on the progress of reform. The Trust would be suitable empowered to discharge its functions.

6.3.2     Power Generation

The six major thermal generating stations of MSEB shall be formed into one or more generating companies. The final number of companies to be formed would be decided after a detailed study. The newly formed generating company(s) will initially be under State Government ownership. The splitting up of MSEB plants into separate generating companies would enable competition to be introduced into the sector. GoM may, at a later stage, invite private sector participation in these companies after the successful privatization of distribution has been completed.

In future, power requirements in the State would continue to be met by the generating company(s) along with IPPs, captive plants and Central sector generating stations. GoM will also encourage non conventional generation plants. In addition, it may be mentioned that the State Government is already in the process of trying to find a workable solution for the Dabhol project.

 

6.3.3     Power Transmission

The transmission business of MSEB will be transferred to a separate transmission company. The transmission company will be wholly owned by the State Government. The transmission company will be responsible for transmitting power from the generating company(s) and other sources of generation available to the State, for further supply to the distribution companies. In addition, it will also look after the State load dispatch centre.

6.3.4     Power Distribution

Since the distribution end of the business deals directly with the consumers and is responsible for collection, reform in distribution is vital if the power sector is to ultimately become self-sustaining.

The distribution business of MSEB will be un-bundled and reconfigured based on the broad principles of concentrated / non-concentrated zones or any other suitable model. Economic sustainability of the distribution companies would be the critical criteria for deciding the configuration of the companies.

The distribution companies would initially be owned by the State Government and will be privatized in a phased manner. The distribution companies would enter into direct agreements with the generating company(s) for the purchase of power.

Substantial internal reforms need to and can be done under the ownership of the State Government. However, to make these changes sustainable, privatization is essential. Introduction of private sector in distribution would more importantly bring in private capital, and result in the medium to long term in the supply of better quality power to consumers at reasonable prices. Private entities supervised by independent Board members and shareholders are likely to make more efficient use of their capital. An improvement in the financial health of the power sector will help to eventually reduce tariffs in the long term and enable better electricity services.

It is expected that unbundling followed by privatization will lead to employees getting new opportunities to undertake greater responsibility, be accountable for delivering results and get attractive career opportunities.

6.4        Rural electrification

GoM is aware that rural electrification needs a different approach. While the reform process aims at making the power sector self reliant and a net generator of resources over a period of time, it will be necessary for GoM to continue supporting the poorer sections in rural areas until their financial situation improves. Decentralized generation projects would be encouraged in rural areas. This will ensure the rural user gets good quality power at standard voltages without overloading the grid. It will also not contribute to transmission losses.

6.5        Role of the State Government in the reform process

The envisaged reform process requires the GoM to withdraw from the regulation and operation of the power sector and eventually, ownership of certain segments of the sector. However, this does not mean that GoM will no longer be involved in the sector. GoM will continue to provide support through basic functions such as of law and order and administrative support.  

In addition, the power sector would continue to require GoM’s financial support during the transition period, which is expected to last five years, before the sector becomes self sustaining. GoM is committed to provide / arrange the necessary financial support required in the transition period to ensure that the reform process proceeds as planned and the sector becomes self sustaining. The requisite funds would be raised from various sources including cess on power sold to all consumers, proceeds from privatization, loans/grants from GoI and financial institutions. Even after the transition period, if GoM takes a decision which would affect the financial position of MSEB/successor entities, GoM would provide necessary budgetary support as compensation.

To ensure that the commitment of GoM is institutionalized, enhance the credibility and mitigate the risk of policy reversals, a Power Sector Reform Fund will be established. GoM will credit to the fund the privatization proceeds, cess on power sold to all consumers, loans/grants from GoI and financial institutions meant for restructuring the power sector. All existing and uncertain assets and liabilities of MSEB will be transferred to the Fund. The Fund will be managed by the proposed Trust.

7          Key milestones

The key legislative milestones in the reform process include the Anti Theft legislation which is expected to be effective from October 2002 and the Maharashtra Electricity Reform Bill which is expected to be passed in December 2002.

The key milestone relating to structural changes will be the corporatisation of MSEB into separate generation, transmission, distribution companies and the formation of a Trust, which will be completed within one year.

The efficiency improvement milestones indicated earlier are summarized below:

Ø      Consumer Charter of Rights to be developed in six months.

Ø      Metering of all feeders of 11 kv and above to be completed by December 2002.

Ø      In urban areas, technical losses to be reduced by 1% and commercial losses by 3% per year. In rural areas, technical losses to be reduced by 0.5% and commercial losses by 2% per year.

Ø      Overall collection efficiency to be increased to 94% in two years.

Ø      Metering of all agricultural consumers to be completed by December 2004.

 

8          Conclusion

The process of reforms cannot achieve the desired results overnight, nor can change be brought about overnight. While it is proposed that the reforms will be initiated in the current financial year, it is expected that it would take 5 years to meet the objectives of the reform process. The success of the reform process depends on its acceptance by all stakeholders including consumers, employees and investors. This White Paper outlines the broad principles through which the Government of Maharashtra intends to approach power sector reforms in the State.