New Delhi: The Economic Survey released has asked the government to push for reforms in the power sector and payment of user charges. The survey stated that such improvement in distribution alone could push the economic growth by 1.5 per cent.

“Improvement in the power distribution area alone could account for over 1.5 per cent of GDP of the fiscal correction,” the survey said while emphasising the need for increased privatisation in the distribution sector.

Citing the example of privatisation of the distribution sectors in Delhi and Orissa, the survey hoped these companies would emulate the success of private sector distribution in Mumbai, Kolkata and Ahmedabad, but said: “The success would impinge upon effective enforcement of user charges.”

Currently, Reliance controlled BSES Ltd and Tata Power are distributing power in different regions in Mumbai and Orissa (BSES). These companies recently acquired distribution circles in Delhi too.

According to senior power sector analysts with SBI Capital Markets, it is estimated that the SEBs are making an annual loss of Rs 40,000 crores due to poor transmission and distribution network and issues related to bill collection. The privatisation of distribution has been proved successful in many parts of India and has helped reduce the losses of SEBs considerably. The survey however pointed out that once reforms in transmission and distribution were in place, it would not be difficult to elicit private investments in generation.

However, it said that the key bottleneck faced today lies in the enforcement of user charges in distribution. It added that if the power sector could work in a reliable manner, it would serve to increase the efficiency of capital utilisation.

According to a BSES spokesperson, the government should formulate policies for the strict enforcement of user charges and to prevent theft. These two issues are the major concerns of the industry.

The government has drawn up an ambitious programme to address the problems entailing new generation capacity of 100,000 MW (which would roughly double the existing generation capacity), and substantial investments in transmission and distribution. According to the survey, the total fund requirement to achieve this would be Rs 800,000 crore.