Committee bats for sweeping reforms to revive power sector in Karnataka

A government-appointed committee has recommended the formation of a holding company to oversee power supply to all parts of Karnataka.

This is one of the several recommendations aimed at streamlining power purchase, debt management and cash management, as the five Escoms were debt-ridden with dues to the tune of Rs 29,764 crore for the fiscal ending March 2022.

The one-man committee headed by retired IAS officer Gurucharan Gollerkeri submitted its report to Chief Minister Basavaraj Bommai on Monday.

The government's outstanding power purchase dues were estimated at Rs 16,400 crore, according to the committee report.

It has also recommended the formulation of a state energy policy, a state energy planning council and energy directorate. A tariff rationalisation plan should also be drawn up, the report said.

Under the proposed restructuring of power companies, the holding company will manage power purchase, debt management, power purchase agreements and loan agreements. The new company will handle "all finance functions except day-to-day maintenance expenditure", the report said.

Under these conditions, Escoms will have financial freedom only for maintenance expenditure, which is in contrast to the broad set of financial powers they enjoy.

Agri power supply

The report also called for rationalisation of agricultural power supply by highlighting that Karnataka has 30 lakh unmetered irrigation pumpsets (IP) that receive free power supply, which the committee said is "a major concern for the government".

Converting IP set subsidy into a "funded liability" and reducing exposure to the state budget, separating agriculture feeders from the power distribution network, introducing direct benefit transfer to subsidise actual consumption of power by the IP sets and metering the IP sets are among the recommendations. These measures are expected to reduce the financial burden faced by the state in providing free power supply to IPs.

Other reforms include levying cess on electricity tax, enhancing tax on captive consumption, renegotiating high-cost power purchase agreements, study of manpower in Escoms and reducing transmission cost among others.

Resource mobilisation

The report projected that four measures could generate additional resources to the tune of Rs 6,624 crore: price intervention measures could generate Rs 750 crore, administrative measures Rs 4,500 crore, efficiency measures Rs 400 crore and new stream measures Rs 974 crore, the committee said.

These measures involve sale to high tension power consumers at a discounted rate, reducing cross-subsidy of domestic consumers, retaining electricity tax collected by Escoms, selling more power, reducing metering and commercial losses among others.