WHAT IS PRE VENTING FIRMS FROM CREATING MORE AND BE T TER JOBS?
of Bangladesh signing a memorandum of understanding with India in 2010 for crossborder power trade that will facilitate the import of 500 MW of electricity and a new Nepal-India electricity and trade project that will facilitate the trading of up to 1,000 MW of electricity. As a result of transmission bottlenecks, electricity exchange between Nepal and India was limited to about 70 MW in 2010. The potential for more effi ciently deploying existing generation capacity through rehabilitation, maintenance, and technical optimization is also important. Improving the commercial and financial viability of the sector Governments in the region have been proactive in curbing losses in the power sector. India’s power development reform program (R-APDRP), launched under the 11th Plan, which aims to limit losses to 15 percent, focuses on demonstrable and measurable performance in reducing distribution losses. Pakistan has conducted technical and operational audits of distribution and generation companies, which provide a menu of actions for the government and utilities to implement (for instance, investments to reduce losses and improve efficiency, administrative and commercial steps to enhance accountability, and upgrading of information systems and management practices).
BOX 4.3
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Many states in India have undertaken rural feeder segregation programs to reduce losses in rural distribution lines and provide uninterrupted power to rural nonagricultural consumers. These mechanisms have had a transformative effect on rural livelihoods in Gujarat, the state where the scheme has functioned the longest and been subject to many evaluations (box 4.3). Tariff rationalization—that aligns tariffs with costs and better targets implicit subsidies—is critical. In Bangladesh, policy makers envisage addressing the sector’s financial deficit through a combination of tariff increases, cost reduction, and demandside management. Retail tariffs were raised by 5 percent in February 2011, but additional tariff increases are required. In Bhutan, the government adopted a more cost-reflective tariff structure after the corporatization of the electricity utility in 2002. During 2004–09, the average electricity tariff increased by 66 percent. Even after the increase, however, tariffs need to rise 73 percent for residential customers and 28 percent for industrial consumers to cover the cost of production (ADB 2010). In Pakistan, consumer tariffs were not increased at all between 2003 and 2007, despite substantial increases in the international prices of fuel oil and gas. Changes in the tariff level and structure carried out in March 2008 were implemented to reduce the
Bringing light to rural consumers in Gujarat, India
Although most villages in the Indian state of Gujarat were electrified by 2003, the power supply remained erratic and unreliable, because the feeders to rural areas were joined and utilities had no incentive to supply 24-hour power to a group of mostly unmetered consumers paying below cost-recovery tariff. The Jyotigram Yojana (JGY) aimed to segregate agriculture from rural domestic and industrial power supply. Feeders were laid to provide 24/7 uninterrupted supply, and farmers were rationed an uninterrupted, preannounced 8-hour supply. The scheme was launched in 2003 on a pilot basis and then scaled up to include the whole state. The scale-up created 1,888 feeders at
a cost of $285 million in a record 1,000 days from initiation to implementation. The scheme was expected to provide better quality power supply to nonagriculture consumers, charge farmers for power use, and ration the power supply to agriculture consumers. The impact of the scheme has been signifi cant: both the quantity and quality of power and enterprise operations improved. As a result, families can now work at night. The Gujurat Electricity Board also experienced increases in revenue collection and made profits in 2010. Sources: Devaiah 2010; Mishra 2010.