Business Today

Lessons from Gujarat and AP

The latest McKinsey report, Powering India—The Road to 2017, gives a thumbs up to Gujarat power utilities for the way they have handled farm sector supplies. Why their power sectors are in a much better shape.

     Print Edition: June 29, 2008

Few politicians have successfully managed electric power and retained political power. Narendra Modi is an exception. When he contested elections in Gujarat last year, he promised uninterrupted power supply to farmers, but for a price. He was voted in. The latest McKinsey report, Powering India—The Road to 2017, gives a thumbs up to Gujarat power utilities for the way they have handled farm sector supplies.

What Gujarat has accomplished is what many states have often wanted to do but abandoned for want of political will. Gujarat’s power companies have segregated agriculture load from others. Result: Remarkable improvement in distribution performance.

Power play: Distribution gains
Power play for distribution gains
The aggregate technical and commercial (AT&C) losses in Gujarat have declined from 30 per cent in 2004-05 to about 20 per cent now. “The effort has helped isolate and measure agricultural demand. This has put the spotlight on remaining losses, leaving little scope to pass off theft or inefficiency as lower-priced consumption by farmers,” the report notes.

Smart move. Andhra Pradesh, too, has done something noteworthy. The low tariffs for industries in the southern state have not only discouraged theft, but have jacked up demand. When the state was selling electricity at Rs 4.70 per unit in 2002, industries bought 5.9 billion units a year.

This year, with electricity available for industries at Rs 3.60 per unit, the consumption is expected to touch 13.8 billion units. Andhra, however, can further help industries by pursuing open access and offering incentives under accelerated power development and reform programme (APDRP).

But these initiatives will succeed only if agriculture load is separated from others and nonagriculture demand is identified independently, notes the report .

K. R. Balasubramanyam

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