Opinion Grid of trouble
The problems facing a new power committee....
The problems of distribution of power are well-known. But when anybody as experienced and competent as former CAG Shunglu is told to investigate it on a committee,some good will come of it,and we should wish him luck for our own sake. In these matters there are always technical issues and changes,but there is also a sense of déjà vu,given that the problem is essentially political. Shunglu has excellent credentials,and is also a person of great integrity; but he is not political.
There was a time when half the electricity boards were running losses,but many had their necks above water. This category started shrinking,and the early reform process,which started privatisation without operational rules,made things worse. The so-called policy for fast-track projects,which had strange rules including paying for not producing power,meant almost all SEBs were in the red. In the late 90s,after much lobbying,the distribution bill was introduced in Parliament. I was then power minister and we fully supported the opposition MP Jagmohan,who chaired a parliamentary committee on the draft legislation.
Organised sectors have their own agendas. The truth is,the world over,privatising power distribution through legislation of this type protects the rights of the small man. In a trip to Canada in the mid-90s,for example,we learnt that their big utility Trans-Alta spent a lot of time and resources before introducing retail markets in power,in working out systems to protect small consumer interests as the mammoths trade. Our Left had concerns on the running of the grids when the lines are privately owned and Jagmohan met them one by one. Finally his committee signed off on a unanimous report,and it got incorporated later in the Electricity Act. That draft legislation was used as the basis of the first big transmission contract to a foreign company,for the Mangalore power project.
For reasons not quite clear it didnt happen again for quite some time.
The tariff on distribution has always been a vexed issue. The parastatals involved always want cost-plus pricing,so that they can make hefty dividends in an otherwise sick activity. The original legislation,introduced in August 1997,provided for young professional regulators. That was later changed,and now they are generally retired civil servants,who play some variant of the cost-plus game with some so-called efficiency add-ons. The private sector loves it; for that way they have a one-to-one connection with the price fixer.
The only good paper the regulators released on distribution tariff fixing was when Surendra Rao of the NCAER was chief of the Central Electricity Regulatory Authority. He recommended a long-term marginal-cost price for the capital component of investments and for the availability tariff for inter-grid despatches. These are both rule-based systems. There is no relation between the price fixer and the price receiver on a one-to-one basis. It is an efficiency price. Fairly constructed it gives powerful incentives to cut costs and make money. Our bureaucrats and politicians dont like rule-based systems because their discretion and,some say,access to gravy goes down. So they play-act at I am fixing the capitalist and giving him a low rate of return.
In fact it is known that such systems cost the consumer far more than rule-based efficiency pricing. But the charade goes on. In a recent review paper on regulatory behaviour in India,Rao shows the waste and cost of such practices.
The Shunglu committee has been asked to go into all this,which is a blessing. Government has asked it to review the electricity tariff,including the role of state governments,state tariff regulators and SEBs in periodic tariff revision. It has its job cut out. More interestingly the committee has also been asked to examine the geographical and spatial compulsions of the industry,and determine their operational impact. That could be a trap,but the way I look at it,unless there are very compelling reasons to the contrary,locational advantages should be rewarded. (That would help states like Himachal,Arunachal and Kashmir.) In other words,the efficiency cost of transmitting power should be paid.
One of the important tasks given to the committee is to work out the manpower requirements for distribution. The next time your car breaks down in a rural area,and you see an 11 KV dispatch centre,just walk in. More often than not there will be no one there. If he is,he may not be very literate. You would be lucky if a bullock has not hit the centre at some point. If there is a fuse,he may not have the wire to repair it,leave aside replace it. No wonder there are studies to show that even when there was power it didnt get to villages. Many years ago,I was told we need more than a million trained workers here. It must be more now. As I said,it is in our interest for the Shunglu committee to succeed.
The writer,a former Union minister,is chairman,Institute of Rural Management,Anand
express@expressindia.com
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