Kristy Mayer - Böcker

This World Bank review, Governance of Indian State Power Utilities: An Ongoing Journey, is a first attempt to systematically examine the quality of corporate and regulatory governance in the Indian power sector. Considering that much of the poor performance of utilities reflected internal and external shortfalls in governance, India's Electricity Act of 2003 mandated unbundling and corporatizing the vertically integrated state electricity boards, along with establishing independent regulators at the center and in the states. The aim was to create a more accountable and commercial performance culture. A particular motivation was the need to keep the state government at arm's length from utilities and regulators alike.This review assesses aspects of corporate governance that would be expected to increase the internal and external accountability of utilities; the institutional design of state-level regulation; and the extent to which regulators have implemented key elements of their mandate. In addition, it examines the correlation between the adoption of recommended corporate governance practices and utility performance, and between regulatory governance and utility performance.It finds that while unbundling the electricity boards has progressed quite well on paper, actual separation and functional independence of the unbundled entities is considerably less than it appears–and clearly identifying the contributions of individual entities in the service value chain and holding them accountable for their performance remains difficult. Corporatization has been unable to insulate utilities from state interference because boards remain state dominated, lack sufficient decision-making authority, and are rarely evaluated on performance.Also, the regulatory environment has not sufficiently pushed utilities to improve performance. State electricity regulatory commissions have been established in all states, but a lack of accountability and autonomy and limited technical capacity have restricted their ability to create an independent, transparent, and unbiased governance framework for the sector that balances consumer and investor/utility interests.

India has been one of the world's leading developing countries in providing electricity to both rural and urban populations. The country's rural energy policies and institutions have contributed greatly to reducing the number of people globally who continue to lack access to electricity. By late 2012, the national electricity grid had reached 92 percent of India's rural villages, about 880 million people. Yet, owing mainly to its large population, India still has by far the world's largest number of households without electricity. About 311 million people still live without electricity, and they mostly reside in poor rural areas. Among these, 200 million live in villages that already have electricity. Less than half of all households in the poorest income group have electricity. Even among households that have electric service, hundreds of millions lack reliable supply, experiencing power cuts almost daily.Achieving universal access to electricity by 2030 is not financially prohibitive for India. The challenge of providing electricity for all is achievable, ensuring that India joins such countries as China and Brazil in reaching out to even its remotest populations. The estimated annual investments necessary to reach universal access are in the range of Rs. 108 billion (US$2.4 billion) to Rs. 139 billion (US$3 billion). Considering that the country already spends about Rs. 45 billion ($1 billion) a year on new electricity lines through the current government program, the additional investments needed to achieve universal access by 2030 are quite reasonable. Investments are not the only hurdle to providing electricity to those presently without service. Policies will need to be aligned with the principles followed in other successful international programs.The potential benefits of electrification for those without service are quite high. The benefits of lighting alone would approximately equal the investments necessary to extend electricity for all. When households that adopt electricity switch from kerosene lamps to electric light bulbs, they experience an enormous price drop for lighting energy and can have more light for a range of household activities, including reading, studying, cooking, and socializing. Households with electricity consume more than 100 times as much light as households with kerosene for about the same amount of money. The potential value of the additional lighting can be as large as 11.5 percent of a typical household's monthly budget. If universal access is achieved by 2030, the cumulative benefit for improved lighting alone would equal about Rs. 3.8 trillion (US$69 billion) or Rs. 190 billion ($3.4 billion) in annual benefits. This is greater than the cost of providing electricity service, and does not even include such benefits as improved communications, household comfort, food preservation, and income from productive activities. With electric lighting, households can generate more income, and children can have better educational outcomes and income-earning potential. Without quality energy services, households often face entrenched poverty, poor delivery of social services, and limited opportunities for women and girls.

India is home to one of the world's largest populations without electricity access. Traditionally, the Government of India has extended rural electrification using two instruments: consumption subsidies and free connections to households below the poverty line (BPL). This study centers on subsidies for electricity consumption, examine their size, frequency, and distribution to households. It uses poverty as a lens through which to focus more closely on these concepts, asking such questions as how well subsidies are targeted to BPL households. The study findings demonstrate that subsidies cover 87 percent of all electricity consumed by India's households. Furthermore, residential subsidies are large compared to the cost of electricity and the small cross-subsidy amounts taken from non-subsidized residential consumption. Moreover, the vast majority of electrified households receive a net subsidy on their electricity consumption. About 87 percent of subsidy payments go to households living above the poverty line (ABL) instead of to the poor, and over half of subsidy payments go to the richest 40 percent of households. The key factor driving this outcome is tariff design. Only some states have highly concessional BPL tariffs. In most states, tariffs for the non-poor are subsidized nearly as much as BPL tariffs. Because non-poor households consume significantly more electricity than poor households, they are eligible for significantly higher subsidies. Owing to the relatively low access rate among poorer households, many of them are unable to take advantage of tariff subsidies.