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7/30/2019 State Power Reforms
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State Power
sector
reformexperience
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Background
• In late 90’s the World Bank had undertaken projects with few states in
India for investments in transmission and distribution; while also
facilitating legal, structural, financial and regulatory reforms• All projects, barring in AP, were termed not satisfactory in achieving
Project Objectives (as part of World Bank’s internal evaluation system)
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Themes Year Project Development Objectives ( PDO)Implementation CompletionReport (ICR) observations
Orissa 1996 Implement a program of regulatory, institutionaland tariff reforms
Support the institutional development of
GRIDCO,OHPC, OERC
Reinforce and rehabilitate Orissa’s power system
and DSM to make power SS and consumption
more efficient
Government should providefinancial support for the
subsidies made necessary by
its policies.
Haryana 1998
To initiate the reform process of the power sector by: Establishing the new legal, regulatory and
institutional framework (including the creation of
an Regulatory Commission and the initiation of
the privatization of the distribution business); and
Removing the most critical bottlenecks of the
power system in a few selected areas to
demonstrate the benefits, which could beexpected from a successful reform
The financial crisis of thepower sector is so deep and
reforms initiated so
comprehensive that it difficult
to capture meaningful
improvements in a short
period of project
implementation
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Snapshot of Power Sector Restructuring Project ( 90’s)
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Themes Project Development Objectives ( PDO) ICR observations
AP
(1999)
To initiate the reform process by establishing
the new legal, regulatory and institutional
framework; launch of preparatory work for
privatization of distribution business;
establishment of independent regulatory
commission
To remove one of the critical bottlenecks of the
power system
Sustainable improvement in power
sector requires addressing the
complex problem of subsidized
power supply to agriculture and
resistance to metering
UP
(2000)
To support the initiation of reforms throughestablishment of the new legal, regulatory and
institutional framework; launch of preparatory
work for privatization of distribution business
To improve quality of supply by reducing
constraints
To build and develop support among key
stakeholders in the state for power sector
reform
Scope & nature of reforms shouldbe consistent with the lending
instrument and firmly grounded in
Bank’s relative role in the given
situation.
Rajasthan
(2001)
To support the ongoing reforms leading higher
sector efficiency and financial recovery (
RERC & private privatization in distribution)
Improve power supply by removing the critical
bottlenecks in power distribution and
transmission systems
PDOs should focus on project
components which are investments
Until full cost recovery through tariff
is achieved by utilities, timely
payment of subsidy support by the
state will be critical for financial
sustainability
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Agenda
Learning from Banks engagement in the 90’s
Building learnings in new project – Case of Haryana
Power Sector Improvement
Flexibility in Using Different Bank Instruments –
Case of Engagement with West Bengal power sector
utilitiesCase of Engagement with MSETCL ( Covered in a
separate presentation)
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Key Learnings from Bank’s engagement in power sector
in the 90’s
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• External agencies like the Bank can only facilitate the process by providing technical andfinancial assistance; and helping build narrative for reforms as politically winnable
• Political and administrative commitment is essential, not just at the beginning, but rightthrough
Ownership and Commitment of the governmentsare critical , with Bank as facilitator
Future
Engagements
with Haryana,
WB and
Maharashtra
• Implementation of reforms is a long term process and flexibility in design and pace of implementation is required to respond to the changes in political economy of the state asthey arise
Integration of Political Economy in theimplementation strategy
• Projects are about investments (unless DPLs) and hence Development Objectives should be aboutoutcome linked to efficient Investments too
• Expectation of the pace at which reforms can be implemented and outcomes realized should berealistic, with moderation on expectation of financial turnaround and subsidy reforms
Realistic expectations
• Upfront visible improvements in quality of power supply and customer service is importantto mobilize support for reforms
• Corporate governance and institutional reforms to ensure long term and sustainable
development• Financial management and accountability are essential
Unbundling is not sufficient
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Incorporating learnings into project design of new
projects –
Case of new Haryana project (board date August 2009)
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Upfront NLTA
during project
preparation for
Institutional
strengthening
Approach has
allowed for
Flexibility to
Deal with
PoliticalEconomy challenge
Project components
On Investments
and TA
• Each project entity wentthrough Vision developmentexercise to come withblueprint of internal changethat was owned by team
• Leading to full fledged NLTAon institutional change –using process redesign
• PDOs linked to improvement of (i) transmission capability (stateincreasing generation by 100%);(ii) Distribution efficiency in pilottowns with investments onHVDS and AMI; (iii) institutionalstrengthening
• PDOs satisfactory after 2.5years of projectimplementation
• New technology on SCADAand new processes on projectmanagement are beingabsorbed
• Challenges of financialsustainability re-emerging
• Technical assistance to state
regulator for improving
regulation on benchmarking,multi year tariffs and customer
service standards
•Policy assistance on
monitoring and evaluation of
agricultural consumption
Complex reforms
through dialogue
and separateNLTA
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Engagement with West Bengal Power sector utilities
Utility serving state of 80 mn people (4.5 GW system)
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Advisory mandate for World Bank on restructuring of sector ( end of 2005)
Partnership with GoWB on restructuring and
capacity building mandate (2005 till early 2007)
3 year advisory mandate on capacity building of Power Sector (through NLTA as well as supervisionresponsibility of DfID TA money) (2007 – 2010)
Investment in Rehabilitation of thermal plant(Ongoing)
Using past learning in being flexible with Bank instrument –Sustained Dialo ue followed b NLTA leadin to Investments
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Learnings from West Bengal (one of leading states on
distribution reforms) now feeding into reforms in other
states
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Operational eff ic iency in vo lves intensive effor t on inclus ive and part ic ipat ive process w ith al l stakehold ers
Use Corporat izat ion as op por tun i ty for in i t iat ing Corpo rate
Governance of State Owned Enterpr ises
Separat ing ideolog ical debates on pr ivat izat ion w ith measu re
to increase product ive ef fic iency of b usiness, helps sus ta in
pol i t ica l and regulatory s upp or t to reforms
Reform effor ts n eed to b e well thoug ht, real ist ic and c redible,
with real ist ic bu siness plans th at balance the need for tar i ff
increases with credib le time bou nd m easures to improve
service standard.
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Thank you
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