Objectives: The objective of this paper is to examine the financial allocations in the plan periods for the power sector and performance of State Electricity Boards before the implementation of reform process in 2003.
Methods/Statistical analysis: In this paper the financial outlays during the plan period particularly from first plan to ninth plan for the power sector development of India has be evaluated. In the process how the State Electricity Boards filled with institutional, administrative, infrastructural problems coupled with using the board to get political mileages were misused and organised, resulting in great financial losses. Ultimately under performances of the boards resulted in introduction of reform process in the sector. Historical and descriptive method was used to study the reasons behind various developments in the power sector in India.
Findings: Subsidies to the agricultural sector negatively affected the SEBs. The state governments over-stretched themselves to provide electricity at a sixth of the actual cost of generation, which means 16 paise per unit versus a production cost of 92 paise. Because of this high debt service and operation and maintenance expenses, the revenue flows could not cover not even a small share of investment costs adversely affecting investments in new capacity additions. Deficiencies arise because of the project delays, resulting in time loss and lost over runs, inadequate budgetary support, constraints regarding acquiring land environmental clearances and rehabilitation plans, constitute infinite drains on the SEBs. At the same time there was no comprehensive plan to address the vital matters. Besides these other problems were over employment, poor plant maintenance, lack of financial control and accountability resulted in low plant load factor and low productivity.
Application/Improvements: This study is relevant for policymakers concerned with the power sector in India and in States on how the sector can enter into problems unless using it as a professional body to address the power supply efficiently without political interference.