NEW DELHI, OCT 18: With Chief Minister Om Prakash Chautala having second thoughts about whether he should go ahead with power sector reforms in the state, Haryana may not get the second tranche, of $250 mn (Rs 1,100 crore), of a World Bank loan meant exclusively for the power sector. A World Bank team from Washington lead by its task team leader Djamal Mostefai will visit the state from October 26 to November 3, to hold review meetings on the progress made by the state which has already been given the first tranche ($60 mn) of a total loan package of around $600 mn. The second tranche was due to the state a few months ago.What is also at risk, apart from the World Bank's funding, is another $1.2 bn (Rs 5,400 crore) the state was to raise from other sources such as the OECF for its power reforms. A thumbs down from the Bank will hit this loan as well - the sanctions already hit a proposal to borrow $400 mn from the OECF. Haryana currently has an energy deficit of 25 per cent, and loses a little over Rs 700crore each year from this sector - cumulative losses are Rs 3,400 crore. As a result, there has been no addition in generation capacity over the last decade in the state.Of special concern to the visiting team are news reports that Chautala has held a few meetings with officials of the electricity utilities, promising to review the reforms programme.Immediately, the main reason why Haryana will be denied, certainly for the time being, the second $250 mn tranche, is the state's inability to go ahead and notify a hike in tariffs for the agriculture sector, which was part of the conditions agreed to by the state when it first negotiated the loan in 1997. Under the programme, the government was to raise agricultural tariffs from the existing 50 paise per unit to 75 paise, to raise around Rs 200 crore in revenue. Industrial tariffs are already a whopping Rs 4 per unit, and cannot be raised any further as industry will soon shift over to cheaper diesel generating sets.While this tariff was to have beenintimated to the state's regulatory commission in December last year, it was first postponed by (the then) Chief Minister Bansi Lal who was becoming increasingly unpopular. Later, with the elections around the corner, Bansi Lal gave up the programme altogether. Chautala, in power for three months now, continues to dither on this, and is now trying to find ways to justify this slowing down to the Bank.For the cash-starved state, however, the World Bank loan is crucial as the state is already running a deficit of Rs 1,100 crore on account of the power sector alone. Under the agreement with the World Bank, the state was to give the power sector a subsidy of Rs 750 crore this year. Apart from this, it is likely to have an uncovered amount of Rs 350 crore - part of this was to be bridged from an increase in tariffs for the farm sector. While Haryana government officials are trying to point out that some part of this will be made up from the state's general budget, World Bank officials have pointed out thatHaryana doesn't have the ability to do this.In any case, under the loan agreement signed with the World Bank in 1997, the Haryana Cabinet passed a resolution agreeing that farmers would pay at least half the cost of electricity - with Chautala now refusing to implement this, the state has clearly breached its agreement with the Bank.
