All about impact of LPG reforms

The Liberalisation, Privatisation and Globalisation reforms were introduced in erstwhile Andhra Pradesh after 1994 general elections

By Author  |  Published: 10th Jun 2019  12:49 amUpdated: 9th Jun 2019  4:07 pm

The article seeks to explain the impact of LPG reforms introduced in erstwhile Andhra Pradesh State on the agriculture and livelihood in Telangana region. The LPG reforms were introduced in erstwhile Andhra Pradesh after 1994 general elections by N Chandrababu Naidu. The Telugu Desam Party won 1994 general elections and NT Rama Rao formed the government on December 12, 1994 and Naidu replaced Rama Rao as the Chief Minister on September 1, 1995.

The LPG reforms were introduced in AP through the following measures:
Committees were appointed to recommend on the reforms to be made in different sectors to encourage investments. The recommendations for the committees were implemented through legislations, government orders and the Vision 2020.


1. Hiten Bhayya Committee:
The committee which was appointed on power sector reforms had released a white paper on the electricity sector in which it suggested the measures.
The white paper suggested that the sectors of power generation and transmission should be separated and all the sections in electricity sector should be run on business principles. It also suggested that the role of APSEP cloud be curtailed to supervision only.
A separate regulatory commission must be established to deal with the decisions related to the sale of power was recommended.
The government took the following measures on the basis of recommendations of the commissions.
1. AP reforms in electricity act were enacted on April 28, 1998 under which the AP electricity regulatory commission was constituted in March 1999.
2. APSEP was divided into APGENCO and APTRANSCO.
3. In April 2000, supply of power was handed over to four companies (DISCOMS).
4. The government abolished all the subsidies given to consumers and devised a phase wise programme for 10 years (1999 to 2009) which included hike in electricity rates from 15 per cent to 20 per cent per year.

Effect of reforms on the agriculture sector:
Since ancient times farmers in Telangana region depended on the tanks for irrigation. With the abolition of Patel-Patwari system by the NT Rama Rao government in 1984, the village tanks were completely neglected as a consequence of which dependence on ground water for irrigation increased. Also, Telangana region required more water for irrigation when compared to Andhra because of the soil and weather conditions. The implementation of these measures resulted in reduction of subsidies and marginal increase in power tariffs, which escalated the input cost of the agriculture. At the same time poor quality of power transmitted to Telangana region which resulted in power fluctuations leading to breakdown of motors. Constant repairs to motors and frequent replacement of motors further increased the input cost of agriculture. During the same time, Telangana region faced severe drought conditions and government did not extend any support to the farmers.

Reforms resulted in
1. Gradual increase in farmer suicides.
2. Significant increase in unemployment rate in rural areas.
3. Distressed migration.

2. Koneru Ramakrishna Rao Committee on Education
The committee released white paper on higher education in which stated that
1. Education is a market commodity
2. It can be offered efficiently by the private institutions and government should not take trouble of managing colleges offering courses in higher education.
3. It concluded that education should be available to those who can afford it.

Reduction in allocation of budget in higher education resulted in increase in number of private educational institutions offering higher education. This made education a costly commodity.

3. Gangopandhyay Committee on Government Expenditure:
The committee examined government services, departments, salaries of employees, pension and suggested some measures to reduce expenditure. The measures were,
1. The committee identified that there were excess number of government employees and suggested that government must reduce 0.9 per cent employees every year from 1996. It also recommended that there should not be any fresh recruitment in government.

Measures Taken by the government to implement this recommendations:
1. Golden handshake scheme-VRS (Voluntary Retirement Scheme)
2. No new recruitments
3. Contract employees
The impact of implementation of these recommendations is clear from the following statistics:-
Before 1996-97 there was an increase of 3.4 per cent in government jobs every year. But because of reforms new recruitments continued only in police department, primary education and medical department which was less than 1 per cent. This measure reduced government expenditure on salaries and pensions from 68.17 per cent in 2000-2001 to 62.18 per cent in 2002-2003.

4. Subramanian Committee on Public Sector enterprises
Its white paper was submitted in June 1995. The committee made the following suggestions:-
a. Government need not be involved in commercial activities and such activities should be left to private sector.
b. Government presence is not required in the industrial sector.
c. Public money must not be wasted in running sick PSUs.
d. As far as possible PSUs must be privatised and if privatisation is not possible only then they must be restructured.