Let There be Light CASE STUDY SOLUTION

 Let There be Light CASE STUDY SOLUTION

Let There be Light

Traditionally, power plants, being capital-intensive, have been set up by the public sector and state electricity boards (SEBs) in India. Everyone agrees today that the energy sector is the major infrastructure bottleneck holding up economic development. A critical aspect of economic reforms thus is the reform of the energy sector.

The Madhya Pradesh State Electricity Board (MPSEB) is not much different from its counterparts in other states. It faces similar problems and is opting for identical solutions. The common elements in the power sector reforms are: corporatisation by breaking the SEB into generation, transmission, and distribution; financial restructuring including debt and interest payment rescheduling; reduction of manpower; and improvements in operational efficiency.

Public utilities, like SEBS, have to be commercially viable in order to survive. Yet historically, this aspect of SEB as an organisation has been sacrificed at the altar of political expediency. The ruling party, irrespective of whether it is the Congress at present or the Bharatiya Janata Party earlier, have made pre-election promises of supplying free or heavily-subsidised power. Digvijay Singh, the present chief minister of Madhya Pradesh, a populist politician earlier, on longer sees electoral benefit in providing free electricity. “It pays to pay” is his refrain today, whether it is healthcare or electricity.

Bold steps—bold, as they still carry the risk of a political fallout with fiery BJP leader Uma Bharti breathing down Digvijay’s neck or the silent schemers of his own party working overtime behind the scenes—have been initiated to reform the energy sector in Madhya Pradesh. MPSEB is to be divided into generation, transmission, and distribution (T&D), and supply companies. Financial management and cash flow management is to be improved. The retirement age of MPSEB employees has been reduced from 60 to 58 years. Effective operational control is sought to be exercised by metering power supply at division / district level to fix responsibility for T & D losses and power thefts. A sustained drive is on to identify non-paying consumers, install meters, and make them pay their bills regularly.

MPSEB’s annual losses are to the tune of a massive Rs 1,600 crore; total liabilities are estimated to be Rs 20,000 crore. Undeniably, are parameters indicating the rot that has corroded the system.

At one level, the reform of the energy sector is a political action but at another, and perhaps, a more fundamental level, it is a question of managing an organisation strategically through strategic actions designed to turn around a vital public utility.

Question

Analyse the problems of the MPSEB from the strategic management perspective. Do you feel that the actions taken or being contemplated are strategic in nature? Propose what else needs to be done to make the MPSEB a viable organisation.