Powerless reforms

Prime Minister Manmohan Singh has called for reforms in the power sector. His opposition to free power and the need to ensure efficiency and enhancement of generation is a timely reminder that the UPA government has so far failed on the question of electricity. Solving the problems of the power sector requires the unbundling of the generation, transmission and distribution of power, and the setting up of sound ground rules for each of these sectors. The central tension is that of coping with the lobbying of the incumbent public sector and shifting to commercial principles.

But barely has the prime minister begun to talk about the need for reforming the power sector to encourage investment in the sector, than the CPM general secretary, Prakash Karat, raises objections. He has reiterated the Left8217;s opposition to privatisation of bankrupt State Electricity Boards SEBs. Karat has also started talking about the need to give free power to farmers. His proposal to give free power to poor 8212; and not rich 8212; farmers is just not practical. On this question, as with so many others, the intellectual bankruptcy of the Left is starkly visible. Karat 8212; and his advisors 8212; have clearly not understood the issues in Indian electricity reform. The SEBs have accumulated losses of over Rs 21,000 crore and lie at the core of the rot in the power sector today. It is not the small and marginal farmers who use the bulk of the power consumed in the rural sector today but richer ones with more land and more household appliances. By fighting for free power for farmers, the Left will perform the same service that they have already performed for the rich members of the Employees Provident Fund Organisation. Karat is proud of the 9.5 per cent interest rate for EPF members 8212; 85 per cent of which is captured by the richest 13 per cent of EPF members. The bulk of the subsidy in power, as in the EPFO, goes to the rich since the subsidy is proportional to the amount of power consumed and richer farmers use more power. Once again the Indian Left, which pays lip service to the interests of the poor, seems focused on protecting the interests of the affluent.

The most depressing thing about leftist policy proposals is that they have been tried. Leftist ideas dominated Indian economics in the sixties, which gave us 3.5 per cent growth and poverty stagnation. India8217;s growth started accelerating and poverty began to decline only when the country began to deviate from leftist policy prescriptions. The UPA government must learn from India8217;s blunders. It must execute policies that benefit the poor, which are very different from socialist policies designed for the kulaks and the urban middle class.