November 9, 1998
The Government has announced its perspective plan for development of the power sector up to the year 2010. It is essential for any country to have at least a medium term perspective for production of electrical energy, given the long gestation period of power projects. However, success of the plan would depend on a whole range of matching initiatives that need to be put in place urgently.
In the longer term, of course, the country would have to move towards greater use of renewable forms of energy. A lack of strategy in the energy sector as a whole and the power supply industry in particular can prove extremely expensive for the Indian economy and can frustrate the plans of the most innovative and dynamic business organizations emerging in this country today.
Now that the days of command and control for economic development are largely over, there is a dire need for establishing or strengthening of appropriate institutions to help foster the development of the power industry.
Much greater intellectualeffort would need to guide the actions of these institutions, as the complexities of growth and development and the force of global competition make lower costs an imperative and drive a move to higher efficiency in the power supply industry. One major innovation that the government has introduced, which needs to be nurtured and strengthened is the establishment of the Central Electricity Regulatory Commission (CERC).
Natural monopolies such as the SEBs require independent regulation to safeguard the interests of the consumer as well as the producer and to ensure that electricity supply takes place at acceptable levels of efficiency. Most developed and several developing countries in the world have well established regulatory bodies that have functioned extremely well. India needs to learn from the experience of these countries and it is necessary for the public to understand the importance, the role and the mode of operation of independent regulatory organizations for their unqualified success.
There issome concern – perhaps not entirely unjustified – that regulatory bodies in India will become merely the mirror image of other bureaucratic organizations, particularly since there would be enormous pressure to man them with persons from the government, and to maintain some degree of bureaucratic control over their functioning.
Failure to ensure that the CERC is truly autonomous and independent and endowed with a high level of expertise can prove extremely costly, because it may not then be able to build adequate confidence in the various stakeholders whose interest would be affected by the decisions of the CERC.
It must also be remembered that the CERC should in every possible way be developed as a model for state regulatory commissions, which it is hoped will be established rapidly throughout the country in addition to the two states which have already taken this step. The CERC is fortunately chaired by a highly respected and competent professional, but government, industry and the public at large mustsee the merit in ensuring complete autonomy and providing full support for this organizational innovation that is being watched not only by business and industry in this country, but by potential investors round the world. It is only when investors have confidence in the ability of Indian regulation to ensure rational prices and financial well being of the SEBs that investments in the power sector will flow adequately to meet the challenge of growth in the coming decades.
The author is the Director of the Tata Energy Research Institute and the Vice Chairman of the Intergovernmental Panel on Climate Change (IPCC).
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