Prabhu hardsold reforms which his Boss didn’t buy

One, there was around Rs 8,000 crore of grants-cum-loans from the Accelerated Power Development & Reforms Programme (APDRP), which over 20 state governments have already signed — states who came up with specific projects to meter consumption of power and strengthen distribution networks would be entitled to this fund over the current year. Prabhu’s target for substantial reforms in the distribution-metering sector was two years.

In addition, there was a fair amount of arm-twisting. State governments were told that central utilities would invest in creating fresh capacity in their states only if they reformed. Tamil Nadu, for instance, has agreed to expedite power sector reforms, so NTPC has agreed to sign up with the state government to set up a 1,000 MW power plant in the state (around 12,000 MW of power is to be set up in this manner over the next five years).

Moreover, central PSUs such as NTPC plan to set up another 20,000 MW of fresh capacity in the next five year period. So that’s a powerful incentive for states to jump on the reforms bandwagon.

Similarly, states were told that Powergrid would make investments (it plans to spend Rs 37,000 crore over the next five years) in only reforming states. The Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC), who finance projects worth around Rs 10,000 crore annually, were also told to work primarily in states that were reforming.

Prabhu, a former chartered accountant, also devised a new strategy of tripartite agreements between central public utilities like NTPC, SEBs and the Reserve Bank of India (RBI) so that any financial advances to states from the RBI would be linked to the payments states make to the power utilities for the power they consume. At least 20 states were in the process of signing these agreements.

Prabhu also got a securitisation formula cleared by the Cabinet on the basis of which states would issue bonds to companies like NTPC for the Rs 41,000 crore dues they owed. In the last two weeks, Prabhu was brainstorming with his ministry on ways to have IT solve the problem for human intervention which led to corruption in billing for power usage.

He wanted an IT solution to keep tabs on power consumed and billing so that there was no tampering with the billing system. ‘‘Just like cellphone bills — you use your phone and the operator bills you for it, no questions, no disputes — this is the model the minister wanted,’ say senior power ministry officials.

Will Prabhu’s departure short-circuit power reforms? Power ministry officials are keeping a brave face, saying nothing is finalised yet, and that several of his reforms had the Cabinet’s sanction.

Privately, however, they admit that delinking reforms — like, say, getting NTPC to set up a power project in a state that is not reforming — is not too difficult, and could well happen under a new minister.