Opinion The problem with power

First,a market for electricity,in terms of distribution and transmission reform,is not born of splitting the electricity boards and then sitting back and watching the fun. The Electricity Act actually lays the ground rules for rule-based open access across grids,but it has just not been given a chance. I remember that the first big transmission of electricity across grids,which was when I was minister; the CM of Andhra Pradesh called me up to complain that the power coming to him,from plants working at very low levels of capacity,was billed at Rs 7 a unit. On checking,we found that the fixed cost of a unit producing little power had been added — a terrible rule to follow,from any welfare angle. It was implementation that was the problem.

So,if some smart person now wants to enforce merit order despatches,time-of-the-day pricing and all the things now technologically possible,while cancelling arbitrary restrictions on grid access and operation,s/he should get a Bharat Ratna. Trade means that small people should have access; and when a fifth of your capacity is captive because the electricity boards have failed — and so everybody has his own power backup — trade can lead to a revolution.

Public sector entities,even reformed ones,don’t like this because their profits go down. I was a great supporter of public sector investment in the national grid,and in fact announced it,but always had to sit on the utilities file on monopoly charges. Retired civil servants as regulators mostly don’t even understand merit-order pricing and availability tariffs — leave aside newer rules. They do love case-by-case orders and the power that gives them. I am not saying they are all corrupt,only that without rule-based prices they can be. What they certainly are is inefficient.

Once this reform takes place,the next one will be in a generation. Again,as recent reports seem to indicate,there is,we hope,an inkling that the ultra-mega power projects are important but do not by themselves solve the problem. That’s where I believe decoupling the sector from arbit financial rules is a beginning.

Of course,the powerful incentives in the possible returns to rehabilitation and capacity expansion mean that the animal energies released might be mind-boggling. Nitin Desai recently chastised me by saying that in my efficiency scenario to build nuclear power I was underestimating the scope of technological change for other renewables,which,with reform,could have a spectrum-like revolution. I cleverly retorted that you can’t carry your renewable power plant with you; but,on reflection,there is much to what he said. Again,the aam admi in the power sector is not there in reform. There is a life after the mega power projects. Anybody who satisfies the demand for power should be allowed to do so. The Electricity Act lays it down. Let’s do it.

The green shoots of reform need to be nurtured and multiplied. Based on some experience,I know we should allow private investment in coal mining,new technologies for using power-grade coal and nuclear power. We could then take on the G-8 in the climate wars,but that’s another story.

The writer,a former Union minister,is chairman,Institute of Rural Management,Anand express@expressindia.com