Nagpur, July 26: State electricity boards (SEBs) should be allowed to fix their own tariffs within the limits allowed by the Indian electricity act and not burdened with `social costs' by populist state governments, according to the public sector Power Finance Corporation Ltd (PFCL), director (projects) KK Govil.

Dr Govil, who is on a pre-appraisal visit to Khparkheda power station of the Maharashtra State Electricity Board (MSEB) for which it had sought finance to set up two more units, told reporters that the PFCL was trying to persuade SEBs to go for more rational tariff structures to improve their financial position and loan repayment capacity.

The corporation was not satisfied with MSEB's tariff structure as difference between rates charged for industries and for agricultural connections was unfavourbale to the former, he said adding while the industrial rate was about Rs 3 per unit, it was 23 paise for farmers.

The social costs, he said, were not accounted and so did not figure in the board's balance sheets as they were covered by cross subsidisation. Instead, the government should directly subsidise the sections to which it wants power supplied at very low rates, Govil added.

The Electricity Act empowers boards to fix tariffs without clearance by state governments to ensure a `rate of return' (ROR) upto 4.5 per cent, beyond which the sanction by state was necessary with central electricity authority (CEA) arbitrating in case of differences.

Govil said MSEB, one of the best electricity boards in the country, was among the few earning an ROR of 3 per cent without any subsidy till 1994-95 but had since been losing heavily.

MSEB member (technical) Prabhakar Kukde, however, defended the state government's action in deciding on a tariff of 0.23 per unit for farmers and said subsidy would have to come from some other taxation if there was no cross subsidy. It was, he said, a matter of social commitment and policy.

Govil, contrary to general opinion that most Indian electricity boards were in a state of mess and badly administered, felt performance of most of the boards was very high according to international standards as they were using the poorest quality of coal in the world and still achieving high plant load and availability factors.

Privatisation should never be resorted to in the transmission sector but there should be privatisation in generation, Govil said.

However, in distribution, privatisation should be limited to bulk sales to distributors and the government should build strong transmission corridors to avert the situation of abundance in one part and power famine in another, the corporation director added.

Electricity boards should also improve distribution management and minimise transmission losses which were to a large extent due to pilferage and power theft, Govil said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.