Power Sector Reforms and Performance Assessment of Power Sector Utilities of Uttar Pradesh

AuthorNagendra Kumar Maurya
DOI10.1177/0019556120906073
Publication Date01 Mar 2020
SubjectArticles
Power Sector Reforms
and Performance
Assessment of Power
Sector Utilities of
Uttar Pradesh
Nagendra Kumar Maurya1
Abstract
A series of power sector reforms were undertaken by the state government
aimed at introducing a set of regulatory reforms and at unbundling of what was
originally an integrated State Electricity Board. The reforms aimed at segregating
production, distribution and regulation functions. Ratification of the Electricity
Act 2003 led to a further deepening of the reform process by dismantling
monopoly in the power sector.
The paper provides an overview of the impact of power sector reforms on
the operational and financial performance of the power sector utilities of Uttar
Pradesh. Utilising the data obtained from the Uttar Pradesh Power Corporation
Ltd. and the Bureau of Public Enterprises, Uttar Pradesh, the paper highlights
the status of transmission and distribution losses, aggregate technical and com-
mercial losses, plant load factor, operating and financial performance of the state
power utilities of Uttar Pradesh between 2002–2003 and 2015–2016 (the latest
point of time for which data is available). In addition to other financial indicators,
liquidity, asset management, leverage and profitability ratios have been calculated
to analyse the financial performance. The paper concludes that the state power-
utilities are yet to cover a long distance to become financially and commercially
viable. However, the positive impact of the reform measures has been abun-
dantly visible since the financial year 2012–2013.
Keywords
Power sector, reforms, f‌inancial performance, Uttar Pradesh
Article
Indian Journal of Public
Administration
66(1) 77–96, 2020
© 2020 IIPA
Reprints and permissions:
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DOI: 10.1177/0019556120906073
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1 Assistant Professor, Department of Applied Economics, University of Lucknow, Uttar Pradesh, India.
Corresponding author:
Nagendra Kumar Maurya, Assistant Professor, Department of Applied Economics, University of
Lucknow, Lucknow–226007, Uttar Pradesh, India.
E-mail: nagendrainsearch@gmail.com
78 Indian Journal of Public Administration 66(1)
Introduction
The poor performance of the power sector utilities has been adversely affecting
the health of the state finances for a long period. Uttar Pradesh (UP) was among
the first states to introduce power sector reforms at the state level in 1999. This
article discusses the power sector reforms undertaken in the state since 1999 and
their impact on the operational and financial efficiency of the power sector utili-
ties. During the 1990s, the power sector in UP, as in the most other states, was
characterised by low and inadequate investment, acute power shortage, high
transmission and distribution losses, irrational tariff structure and operational
inefficiencies (Thakur, Deshmukh, & Kaushik, 2006, p. 1187; Urpelainen, 2016,
p. 535). These problems manifested themselves in huge cash losses for the UP
State Electricity Board (UPSEB) year after year. By March 1999, the accumulated
losses of the UPSEB were `10,300 crore or 6 per cent of the gross state domestic
product. The outstanding payables to power suppliers were about `3,400 crore
and to fuel suppliers `2,100 crore (Planning Commission, 2006, p. 234). The
cumulative subsidy payable by the state government to the UPSEB rose from
`1,715 crore in March 1991 to `11,266 crore in March 1999.
It is against this background that the power sector reforms were introduced
in the state, with the UP government issuing a power sector policy statement in
January 1999. The main objectives of this policy were to: (a) supply electricity
under the most efficient conditions, in terms of cost and quality, to support the
economic development of the state of UP; (b) make the power sector commer-
cially viable so that it ceases to be a burden on the state’s budget and eventually
becomes a net generator of financial resources; and (c) protect the interest of the
consumers.
The state has been over the last ten years implementing a range of policy
reforms to make organisational, structural and technological improvements in
the power sector. This paper analyses the operating and financial performance
of the power sector utilities of Uttar Pradesh with effect from financial year
2002–2003.
Power Sector Reforms in UP
The main principle of the reform programme was that the state government should
withdraw from the power sector and give autonomy to the power sector utilities to
function on the commercial lines. In order to give legislative backing to these
reforms, the UP Electricity Reforms Act was passed by the UP legislature and
notified in July 1999. The power sector reform programme envisaged the follow-
ing steps:
1. Restructuring and unbundling of the UP State Electricity Board while seg-
regating power generation, transmission and distribution functions into

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