By Sumarbin Umdor
The above title, borrowed from the report of All India Rural Debt and Investment Survey of 1951 by replacing the word cooperatives with MeECL (Meghalaya Energy Corporation Limited), succinctly describes the state of the Corporation while at the same time underscoring the importance of its revival and success.
In this essay I (a) summarise how MeECL and the state have reached the present unenviable situation, (b) examine the proposal of the Corporation to introduce Input Based Distribution franchisee (IBDF) in the state which has now been withdrawn, and finally (c) propose for civil society led shadow monitoring of the functioning of the Corporation.
An orphaned child: Prior to the corporatisation of the Meghalaya State Electricity Board (MeSEB) in 2010, the then Board was operating as a vertical integrated utility handling generation, transmission and distribution of power in the state. Till the late 1990s, Meghalaya was in a power surplus position and MeSEB was the best place to be employed in the state with employees enjoying free electricity, regular bonuses and upgradation of their salaries every five years. The exponential increase in demand for electricity, particularly from the power intensive industries that came up after the implementation of the North East Industrial Policy of 1997, along with the failure of the state to set up new power generation units have led to a situation where about half of the power procured by state owned distribution corporation (MePDCL) is being met from central power utilities purchased at a considerably higher price.
The dismal failure to reduce aggregate transmission and distribution losses (AT&C at 35 per cent is among the highest in the country). Compounded by mismanagement and corruption the result is a combined loss of about Rs. 500 crore (2019-20) of the three state owned power corporations (generation, transmission and distribution) with 88 percent of it being the losses of the distribution unit (MePDCL). As on March 2020, MePDCL is saddled with outstanding dues of Rs. 1346 crore which it has repeatedly reneged to pay compelling the central power and transmission companies (NEEPCO, NTPC, PGCIL, etc.) to regulate power supply as a last effort to recover their dues.
So, who is the culprit? It is true that the successive governments in the state have been slow to add capacity and revamp the functioning of the Corporation. The presence of well-entrenched vested interest groups indulging in power theft and other corrupt practices have only worsened the situation. The managerial and technical leadership steering the Corporation have in many instances been wanting particularly in timely execution of projects and overall employees’ efficiency is also low. Certain sections of the community also view the Corporation mainly as employment avenues with no regard for its commercial concerns. Therefore, in a way, MeECL is like an orphaned child who has gone through many abusive foster homes and all those who she has come across have taken advantage of her.
An Attempt at Forced Adoption: Due to high losses in the distribution sector, the central government has been trying to introduce private players though multiple distribution licencing with limited success. This has led the central government to introduce an alternative way through the distribution franchisee (DF) to enable private companies to enter and invest in the sector. In this model, a state-owned distribution entity can allot a private company a certain area for distribution of electricity on its behalf for a fixed duration while maintaining public ownership of the distribution sector.
The success of IBDF in Bhiwandi circle of Maharashtra, where the entry of the private distributor (Torrent Power) in 2007 led to doubling of revenue collection in two years and reduction of T&D losses by 43 per cent in four years, is often touted as an example of success of this model. Of course, there are also other instances where DF have not worked and existing contracts terminated due to different factors. These challenges in implementation of the IBDF in India are discussed in detail in the paper ‘A critical review of the franchisee model in the electricity distribution sector in India’ by Thakur, et.al. (2017).
IBDF is under implementation in many circles in as many as 6 states with the twin objectives to bring down spiralling losses and improve the services to consumers. In that sense, the IBDF proposal for the two circles in Meghalaya is not new and should otherwise be welcomed as a much-needed intervention to revive MeECL. However, what has raised eyebrows is the manner in which it was brought forward with no details available on the terms under which the circles were to be handed over to RECPDCL (REC Power Distribution Company Limited). Questions like the absence of competitive bidding, long duration of the contract (many other existing IBDF contracts are for 10 -12 years), lack of clarity on investment obligation of the franchisee, revenue sharing formula, sub franchising clause etc., have not been clarified. The whole proposal felt as if it was being forced on the state with the two circles being given away to an outside entity on terms known only to a small circle in the government.
Meghalaya has been very tardy in reforming its economy and governance structures to meet the demands of changing times. So, for the government to rush through the IBDF proposal without proper discussions with its coalition partners (and not just cabinet members), leave alone the opposition, is a hasty move. As expected there is strongly resistance given that there is existing demand to remove the people championing the DF proposal. Two important lessons learned from this episode are (i) It is not enough that vetting of such proposals should be limited to government departments. Rather, there should have been wider consultations and public disclosure before a formal acceptance decision is taken by the government (ii) The person heading the department proposing any reform measures such as in this instant case must enjoy the confidence of coalition partners and that of the general public. Sadly, this cannot be said with the present Minister of Power of the state government.
Group Parenting: The provision of 100 per cent state budgetary support for loans taken by MePDCL under the Atma Nirbar Loan scheme to clear existing liabilities is not the end of the power crisis unless it is accompanied with fundamental changes in the way the Corporation functions as well as realisation of performance targets. Otherwise, we are only stalling a much bigger crisis which will visit us in the near future. In fact, there is a real danger that full government support to loans taken by MePDCL may create a morally hazardous situation where the Corporation loses all incentives to improve performance knowing that it will be bailed out by the state government. For a resource starved state like Meghalaya, rescuing the mounting losses of the Corporation can come only at the cost of investment in health, education and other sectors of the state.
This episode has hopefully opened the eyes of employees and there would be renewed vigour on their part to help revive the MeECL. But there is a limit on the role that they can play in resurrecting the fortunes of the Corporation. A much bigger responsibility lies squarely on the government of the day as being the owner, it has a say in the appointment of an independent board, a competent management team and more importantly in withdrawing political patronage from those engaging in rent extraction from the Corporation.
Finally, is there a way out of this mess? One of the steps that needs to be taken is for civil society organisations (CSOs) to be involved in monitoring the functioning and performance of the Corporation. CSOs are increasingly undertaking monitoring and auditing role (shadow monitoring) of government policies to evaluate their effectiveness. Involvement of CSOs in government projects is being promoted by international institutions as a good practice and essential strategy to combat corruption. In the present situation, it calls for setting up of a CSO led watchdog committee consisting of knowledgeable and independent members of the public and other stakeholders coming together to externally and independently monitor and report the functioning of the Corporation. The committee can use RTI and insider information to secure necessary information to analyse major policy decisions, expose and counter policies and actions detrimental to commercial interest of the Corporation, advocate and support good policy alternatives, and lastly to provide the public with regular reports on the functioning and performance of the MeECL.
Hopefully, in the coming together of all stakeholders and the civil society in the caring and nurturing of MeECL, we will finally be able to reverse the financial woes of the Corporation and set it on the road to recovery.
(Prof Sumarbin Umdor teaches Economics in NEHU, Shillong. Email:[email protected])