Don’t play politics on power

First and foremost, the goal of power for all by 2012 depends on significantly augmenting generation capacity. Monitoring the timely commissioning of projects by a newly proposed national power projects management board can reduce implementation delays. Hopefully, the states would heed the advice to create a similar apparatus. Time and cost overruns of power projects, apart from design deficiencies, faulty fuel linkages, tardy land acquisition, and failure to assess likely tariffs, all need to be addressed holistically.

Even in respect of projects under the Centre, state governments have a crucial role to play. It now needs to be seen how this project management board is manned, the quality of its coordination, and more than anything else, its ability to resolve problems in a timely fashion. Mere monitoring can add to knowledge and enhance expertise but resolving problems, including dispute resolution, is crucial for project management. Hopefully, this will not be a mere monitoring body but function as an empowered group. The power ministry must yield authority and space for this body to function as an autonomous entity.

Second, the issue of open access in transmission and distribution is predicated on regulators restructuring cross-subsidy surcharge, wheeling charges and flexibility to determine tariff for enabling contractual arrangements with dedicated consumer groups.

I am afraid this is beyond the mere regulatory domain but needs the missing political will. It is this that has delayed greater recourse to open access driven by the clout of the dominant monopoly of the state electricity boards (SEBs) in view of their persistent inability to withstand competition. These SEBs will continue to lobby to hinder open access since the beneficiary consumers are dispersed and cannot counteract the power of the dominant monopoly. The Centre needs to deal with this more firmly than leaving it in the lap of state regulators through more stringent application of incentives and penal action.

Third, the current level of AT&C losses, amounting to Rs 47,000 crore per annum, has been readily recognised as the weakest link in the power system; and the commitment to reduce it to 15 per cent in the APDRP projects needs concerted action. Of course, using information technology applications for improving the energy audit and franchising distribution is the right route to follow.

However, in the past, such incentive schemes have not worked. No doubt the adherence by all states to the fiscal responsibility act, for availing of the benefits of debt rescheduling, disciplines state finances, putting them under pressure to reduce subsidies to SEBs. Nonetheless, tariff rationalisation — increases in many cases — is so deeply embedded in the psyche of competitive populism that frequent electoral cycles derail any systematic and sustained effort for a reasonable length of time to make a qualitative difference.

De-politicising electricity tariffs requires broader bi-partisan support. Unless the mainstream players are willing to act collectively, it will be unduly optimistic to expect significant positive outcomes. In managing this problem, we recognise that it’s crucial for improving the health of the sector as well as necessary to attract significant private investment.

Private investment without a letter of credit or some kind of guarantee mechanism, irrespective of their nomenclature, becomes a necessity for private investors to secure financial closure. Nonetheless, mere cocooning and creating firewalls for individual power projects (mega or ultra) from the more endemic issues of power reforms can only yield short-term benefits.

Fourth, energy conservation measures, namely demand-side management, need special focus and incentives, both from the viewpoint of power availability as well as managing environmental concern during a period high economic growth. Even while the prime minister just participated in the G8 summit, it is a pity that issues of renewable energy were not considered at the power conference even though climate control is a dominant concern of G8.

Issues of renewable energy and climate change are important enough to deserve a separate meeting of policy interlocutors. There are many more complex issues, like inter se fuel prices and improved demand management through calibration of availability-based tariff, which deserve further consideration.

Finally, a standing group of power ministers under the chairmanship of the Union power minister is to meet every quarter. This would be useful in monitoring project implementation and other regulatory issues. However, genuine progress in the power sector requires bi-partisan support and a special national group on power, representing a broader political spectrum, in order to build and carry forward any consensus on these daunting challenges. Without a broader political engagement that can withstand change of governments and the underlying uncertainties of electoral cycles, these issues would remain grossly under-addressed. Power reforms brook no delay, and we hope to see some light at the end of the tunnel.