Idea Exchange: States need to be rated on fiscal matrix, says NK Singh, chairman, 15th Finance Commission

Given that contingent liabilities arising out the large outstanding debt and rising losses of electricity distribution entities (discoms) remained an intractable problem and an unmitigated risk to states’ finances despite a series of financial bailout packages, ‘genuine reforms’ in the power sector could not wait any longer, 15th Finance Commission chairman NK Singh said on Wednesday. Unbundling of the state power utilities was still an unfinished task, he noted, and added that the issue of ‘regulatory capture’ – state electricity regulators being hamstrung by the political executive –, needed to be addressed on priority, along with a fast-tracking of privatisation of discoms.

Speaking at the Indian Express Idea Exchange, Singh said that although the Centre might not appear to be scoring higher than the state governments on the yardstick of spending quality, the states’ fiscal performances were very mixed, with some of them tending to be profligate, (primarily because the power sector is mired with large cross-subsidies, still-to-be-eliminated pilferage & theft and unsustainable freebies).