>INDIA UTILITIES: Key Highlights from the Shunglu Committee Report on SEBs

■ Effectiveness lies in implementation: Most of the committee’s recommendations to improve the future performance of distribution companies are intuitive – but their effectiveness would lie in their implementation. In 2001-03 the discoms were similarly bailed out with the proviso that they would improve their performance, which has clearly not happened. In our view, the committee has proposed another bailout through the SPV, but it remains to be seen whether RBI would be willing to be a party to this.


■ The Committee submitted its report on December 15… In July 2010, the Planning Commission set up a High Level Panel (Shunglu Committee) to look into the financial problems of the SEBs and identify corrective steps. The committee has found the accounts of many of the discoms to be in a less than desirable state. It estimates that the losses of discoms (post subsidy) of Rs270 bn in F2010 could come down to Rs221 bn by F2017 provided the discoms actively correct course.


…making certain key recommendations for discoms to correct their course:


• Creation of a SPV, with a line of credit from RBI, to buy distressed loans of discoms
• Improving the quality of accounts via computerization and rationalization of outstanding receivables
• Use of pre-paid meters for defaulting consumers
• Introduction of a zone-based loss surcharge, linked to the zone’s loss levels, in bills
• Improving independence of the SERCs by changing the method of appointing members
• Monitoring of SERCs’ performance in terms of regular and if required suo-moto tariff hike implementation by the SERCs



Recommendations by the committee:
• Physical verification and preparation of fixed asset register
• A program of stock reconciliation and physical verification
• Inter-unit reconciliation of accounts
• Review of the receivables outstanding with a view to enumerating what is recoverable and what is not
• Systematic and comprehensive computerization



To read the full report: INDIA UTILITIES
RISH TRADER