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BW Businessworld

Aiming High, Firing Low

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The Union Budget 2012-13 has upped the allocation for the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) by 53.09 per cent to Rs 3,114 crore. The central scheme had been allotted Rs 2,034 crore in 2011-12. There is nothing wrong with that except that the scheme has been rewarded instead of being punished for under-utilisation of funds. The revised estimate for 2011-12 pegged fund use at Rs 1,668 crore, with Rs 366 crore remaining unspent.

The R-APDRP, launched in 2000-01 as APDRP and restructured during the 11th Plan, was introduced to improve the financial viability of state distribution utilities through sustained aggregate technical and commercial (AT&C) loss reduction. Under its ‘investment component', the Centre doles out assistance to strengthen and upgrade the sub-transmission and distribution network. North Block dictates that at least 50 per cent of the allotted amount be utilised by September of each financial year; failure to do so results in a cutback of funds.

So where did R-APDRP falter? Says G. Swanza Lian, under secretary in the Ministry of Power: "Many utilities failed to finalise their DPRs (detailed project reports). And despite our efforts to expedite the process, it was not possible to release the money."

But Power Finance Corporation (PFC), the nodal agency for R-APDRP, has a different story to tell. "We required the entire amount originally allocated under the scheme in 2011-12, but the ministry did not have enough funds," says Satnam Singh, chairman and managing director of PFC. He says he is hopeful of utilising the earmarked funds going ahead.
According to Feedback Infrastructure Services, which provides consultancy to 10 states on setting up IT-enabled systems to attain reliable baseline data under Part-A of the programme, the utilities were slow off the block in filing the DPRs to kickstart the programme in their respective states. Vikram Apte, advisor (power) at Feedback Infrastructure Services, points to delays in follow-up measures like preparation of RFP (request for proposal) or tender documents, finalisation and award of contracts to successful bidders, non-availability of project-specific manpower to monitor and execute the projects, and the inability of state utilities to handle high-value contracts.

Apte believes the utilities are better prepared this time and there will be swift progress on the ground. "During 2012-13, substantial progress is expected. There are examples of a few utilities in Gujarat, West Bengal, Maharashtra, Madhya Pradesh and Andhra Pradesh where work is on in full swing." But there are laggards as well. "Utilities in Bihar, the North-east, Jammu & Kashmir, Kerala and UP are struggling," he adds.

One of the eligibility criteria for the R-APDRP line of assistance is that AT&C losses have to be bought down at the utility level. Those with AT&C loss above 30 per cent have to reduce it by 3 per cent every year; those with losses below 30 per cent have to bring it down by 1.5 per cent every year. The only silver lining is that some states seem to have a firm grip on their specific shortfalls. Seen in this light, the hike under R-APDRP is a welcome one. But it can again become a case of aiming high and firing low.

(This story was published in Businessworld Issue Dated 02-04-2012)