The grid failures might have been a national problem, but for a real understanding of the energy sector woes, you have to look at the scene in the states. Take Rajasthan, which failed miserably at a World Bank-planned restructuring, leaving power companies mired in a serious debt trap.

The power sector restructuring began during the first tenure of chief minister Ashok Gehlot (1998-2003) with the unbundling of the Rajasthan State Electricity Board (RSEB). The World Bank (WB) had approved the Rajasthan project on January 18, 2001 only after the state accepted its condition of ensuring passage of the Power Sector Reforms Bill. It was claimed that every aspect of the power sector would be hunky dory. But what ended up happening was just the opposite.

The state's three distribution companies, called discoms, now have a combined debt burden of more than Rs 64,000 crore. The debt burden on each of the generation and transmission companies is of the order of Rs 11,000 crore and Rs 8,000 crore respectively.

Incidentally, this debt is not reflected in the state budget or fiscal deficit, since the companies are "independent entities". Even so, the total debt on the state is to the tune of Rs 107 lakh crore. It all began with a WB loan of $ 180 million equivalent on January 18, 2001. The total project cost was estimated to be $ 221.5 million, with $ 39.5 million provided from the resources of the Rajasthan government and $ 2 million in grant from USAID. Of this, $ 166.2 million (92.3%) of the total loan amount was disbursed and the balance $ 13.8 million was cancelled by the Bank.

Then RSEB chairman P. N. Bhandari was initially enthusiastic about the reforms, but later resisted the WB loan, claiming the state would do equally well, if not better, by resorting to domestic borrowings. Then chairman of the state's Administrative Reforms Commission, former Congress chief minister Shiv Charan Mathur, too, vehemently opposed the WB prescription.

But the central government emerged as a vociferous advocate of the 'reforms'. The WB got a draft Bill prepared by its consultant - Price WaterhouseCooper - and handed it to the state government. Gehlot managed to get this passed in the state legislative assembly. In retrospect, even the World Bank has confessed that the original project design failed to take adequate account of political realities in Rajasthan, and "...[the] project design was over-ambitious, and the objectives were out of proportion.

The covenant in respect of the privatisation of the distribution companies was especially unrealistic." After the first financial restructuring plan failed, a second plan was elaborated in 2003 following the dropping of the covenanted objective of private investment in distribution.

This also proved unattainable, and a third plan began to be implemented in November 2005.

"The losses rose again in FY07 (financial year 2007) before soaring to unprecedented levels in FY08 and FY09.

In the latter year, they were 2.5 per cent of the state's GDP. By March 2009, accumulated losses amounted to $ 73 for every Rajasthani," the WB report said.

One wonders why the central government and the Reserve Bank have since involved 26 different commercial banks in debt restructuring, with heavy interest rates, just to bail out the failed restructuring model. Debt worth Rs 35,000 crore from commercial banks due for payment after October 2011 had to be restructured for the discoms in the fourth quarter of 2011-12. Prior to restructuring, the rate of interest was between 11 and 12.5 per cent.

After the recast, it was 12-13.5 per cent. The state government is the guarantor.

The authorities' reluctance to look for an alternative model is also questionable. Why do the political masters not dare make the agricultural consumer - even those benefiting from irrigation facilities created by the state - share the burden of development?

In a recent report, even the World Bank has admitted that the original project was "over ambitious" and the objectives were "out of proportion"