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Privatising Power Cuts? Ownership and Reform of State Electricity Boards

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Joël Ruet
Academic Foundation, India (February 2005)

Beyond ideologies, beyond hiccups and cycles of reforms, privatisation of State Electricity Boards of India (SEBs), just like their public reform, are structurally stalled. This book argues that the emphasis on ownership is misleading and needs to be articulated more subtly, with a look at the organisational structure of SEBs.

An in-depth enquiry of SEBs shows how privatisation is a one sided game that has no real takers as long as SEBs remain organisations in which all technical, accounting, financial parameters remain at the least hazy, but often unknown. No investor will come without guarantees, thus the public has the impression that SEBs are 'privatised for a song', while the economist feels that they are virtually valueless...while in practice, awaited investors do not even turn up.

The book pinpoints, as the core of the stalemate, to the misconception in the very concepts generally used to analyse the internal organisation, the functioning, and the nature of SEBs. SEBs have now to undergo a specific and structural series of organisational changes, that the author calls 'enterprisation'. Privatisation is far from being the only tool for achieving this, among a wide set of public-private partnerships. 

The matter is of importance, for not all states can afford, the way Delhi did, to pay for endlessly renegotiable financial guarantees. 

Joël Ruet is a fellow of DESTIN at LSE and teachers in Jawaharlal Nehru University, New Delhi. 

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Comments on the book

'Joël Ruet is an insider. An excellent economist, as well as an engineer, his investigation inside SEBs is remarkable. Using the theories developed by James March, as well as property rights theory, he establishes the profound difference between an administration and an enterprise. SEBs being administrations, they cannot be 'privatised'. An intermediary step, 'enterprisation', is necessary. The richness and novelty of this analysis allow extending to other public organisations in service sector, as well as other countries where the reform of the productive functions of the State is the agenda of the day.' 
Professor Pierre-Noël Giraud, Ecole des mines, Paris, and a member of the French Academy of Technology

'The question of how to reform India's loss making State Electricity Boards has vexed economists for years. Joël Ruet provides a fresh and detailed analysis...' 
Michael Pollitt, co-leader, Cambridge-MIT InstituteDirector of Studies in Management and Economics, Sidney Sussex College, University of Cambridge

'Dr Ruet is the only person I know who has established through his studies of their operations, that SEBs in India have an administrative culture. Dr Ruet has studied SEBs intensively and has ample evidence to make the comments he does. The book provides graphic descriptions of the internal decision-making processes in SEBs. It is a pity that management academics have not done this kind of study earlier because it throws up the basic reason for the decline of the SEBs. This is a book that must be read by SEBs, regulators and government officials.'
SL Rao, chairman, ISEC, Bangalore, and formerly director general, NCAER , and chairman, Central Electricity Regulatory Commission.

'Dr Ruet's book should be essential reading for all those concerned at the apparent failure of the World Bank's recommendations to reform the electricity supply industry in many developing countries, India providing an excellent example.'
David M Newbery, director, Department of Applied Economics, University of Cambridge 

'This book provides indepth enquiry and very useful insights into the problems of reforms of the State Electricity Boards in India.'
Ramprasad Sengupta, dean, School of Social Sciences, Jawaharlal Nehru University, New Delhi


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