"Stealing" electricity in Uttar Pradesh

[Louis Proyect <lnp3@xxxxxxxxxxxxx>]

NY Times, February 6, 2000

India Tries to Plug a Cash Drain: Its Power System

By CELIA W. DUGGER

NEW DELHI, Feb. 1 -- Throughout India, billions of dollars worth of
electricity is stolen each year by consumers in league with utility
workers, bureaucrats and politicians, according to the nation's ministry of
power. Line workers are bribed. Meters are fixed.

In Uttar Pradesh, India's most populous state and one of its poorest, more
than 40 percent of the power generated is pilfered, according to a recent
independent audit.

Corrupt, politicized state power systems have turned into sinkholes that
are sucking down staggering sums of money that could have been used to
educate the world's largest concentration of illiterate people or to
provide them with clean drinking water, economists say. At the same time,
those bankrupt systems routinely leave people in darkness and factories
idle during rampant power failures, retarding economic growth.

For years, such everyday facts of life have been common knowledge, but only
recently have high-ranking government officials openly talked about them
and begun seriously trying to reverse the dim reality.

"The power's not being sold, it's being stolen," the country's minister of
power, P. K. Kumaramangalam, declared in an interview.

Last week, the state of Uttar Pradesh won a crucial test case when it
refused to back down on its move to break up the State Electricity Board
despite a strike by 89,000 power workers. The workers, rightly, saw the
move as the first step toward eventually privatizing parts of the power
system and establishing a regulatory commission to set rates that would
help reduce the losses.

The workers feared that a better-managed private system would threaten
their jobs and stop an unchecked flow of bribes, many experts said. But on
Jan. 25, after an 11-day strike, the workers gave up their fight and went
back to work.

The workers' fears may not be unfounded. In their absence, a mere 1,100
substitute workers were able to keep power humming to most customers in the
state, which has a population of 160 million.

Mr. Kumaramangalam, himself a former trade union leader who once battled
privatization, said the state's whole system could easily operate with just
15,000 workers.

Economists and officials say the state's victory -- with firm backing from
the central government -- was a turning point. The state electricity system
will now be divided into separate units, for generation on the one hand and
transmission and distribution on the other.

"If the state had caved, it would have been the end of the reform process
in transport, roads, ports -- not just in the power sector," said Mr.
Kumaramangalam, a leader in the Hindu nationalist Bharatiya Janata Party,
which heads the governing coalition in New Delhi.

The process of change is slowly building momentum. Last fall, the eastern
state of Orissa became the first in India to put power distribution in the
hands of private companies. Haryana in the north, Andhra Pradesh in the
south and now Uttar Pradesh, also in the north, are moving in the same
direction.

It was not always this way. From 1993 to 1996, the World Bank, which has
played a catalytic role in financing India's power system, simply stopped
lending for power projects. Theft, huge subsidies for farmers and domestic
consumers, and a bloated bureaucracy had turned the state electricity
boards into huge money losers.

"We came to the hard conclusion that there was no way to reform the state
electricity boards from within," said Joëlle Chassard, the bank's country
coordinator for India. "We tried and failed miserably."

The World Bank made further aid conditional on a state's willingness to
reform its power system. In states like Uttar Pradesh, which are broke,
bank officials felt that there would be no real money for education, health
and poverty programs unless the financial hemorrhaging of power could be
stopped, nor could the reliability and adequacy of the power supply be
improved.

The state had no money of its own to invest in upgrading its power
services, and private companies were unwilling to invest in new plants
because the electricity boards had no money to pay for the power they
generated.

The bankrupt power system had helped cripple both antipoverty measures and
economic growth in Uttar Pradesh, a particularly grave situation in this
fast-growing state whose population is expected to rise to 250 million in
25 years.

If Uttar Pradesh goes forward now with plans to turn over power
distribution to private companies -- which would be unwilling to tolerate
unbridled thefts of power that would endanger their bottom lines -- the
World Bank is likely to loan the state billions of dollars over the next 5
to 10 years for a wide variety of development projects, bank officials say.

And more states are showing an interest. In recent months, since Andhra
Pradesh's chief minister, Chandrababu Naidu -- known for having taken
politically unpopular steps to curb subsidies and reform the power system
-- won re-election, other state leaders have gone to the World Bank.

"Over the last few months, we have observed real competition among states
for going ahead with reforms," Ms. Chassard said. "We are facing a problem
now of having to say no to some requests for help because we have more than
we can handle."

Change will not come without opposition. Over the years, thievery has
become entrenched because so many have benefited: the consumer whose meter
is slowed to give a lower reading, the worker who collects bribes for
tinkering with the meter, and the politicians and bureaucrats who sell jobs
to supervising engineers.

As power workers poured out of a jail in the town of Dasna in western Uttar
Pradesh last week, where they had been held for taking part in a strike the
state had declared illegal, the men -- wearing garlands of marigolds to
celebrate their release -- bitterly blamed the politicians for the
corruption and insisted that it could be cleaned up if the political will
were there.

But their descriptions of the problem only underlined the pervasiveness of
the corruption -- and how hard it would be for anyone who is part of the
system to root it out.

"The political interference in the electricity board leads to theft by
industrialists close to bureaucrats and ministers," said Jagdish Singh
Sisodia, who has worked as a clerk at the board for 32 years. "They are
protected."

And as other workers clustered around, seconding his opinions, Mr. Sisodia
related how government investigators who are supposed to stop the bribery
just wind up demanding their cut of the take.


Louis Proyect
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