India needs sweeping reforms in power distribution, World Bank report says

25 June 2014 (Last Updated June 25th, 2014 18:30)

India needs extensive reforms in power distribution in order to meet its goal of expanding access to electricity to all by 2019 and bring back the country to a high growth trajectory, a new World Bank report revealed.

India needs extensive reforms in power distribution in order to meet its goal of expanding access to electricity to all by 2019 and bring the country back to a high growth trajectory, a new World Bank report revealed.

In a new report titled, More Power to India: The Challenge of Distribution, the World Bank identified the distribution utilities as the Indian power sector's weakest link.

In order to move to a higher level of service delivery, the report recommended freeing utilities and regulators from external interference, improving accountability, and enhancing competition in the sector.

Although the financial health of the sector is fragile and is limiting its ability to invest in delivering better services, the possibility of a marked difference in sector performance can be noticed by tackling the losses through a focused approach, the report said.

"Revitalising the power sector, by improving the performance of distribution utilities, and ensuring that players in the sector are subjected to financial discipline is the need of the hour," World Bank Country director in India Onno Ruhl said.

"The report recommended freeing utilities and regulators from external interference and improving accountability."

According to the report, annual losses in 2017 would amount to INR1,253bn ($27bn) even if electricity tariffs rise 6% per year to maintain pace with rising supply costs.

The report provided three key recommendations including fully implementing the Electricity Act mandates, especially those on competition and distribution such as tariffs, open access, and performance standards.

Recommendations also include ensuring regulatory autonomy, effectiveness and accountability for utilities and regulators and protecting utilities from state governments to prevent interference with internal operations.

World Bank Group senior economist Sudeshna Ghosh Banerjee said, "Today, in addition to the state government, outside stake-holders, specifically the regulators and commercial financial institutions, have a key role to play in creating an operating environment that provides incentives for improved performance."

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