Some encouraging signs have been visible recently of the power ministry taking steps towards creating a market for the besieged power sector. It was reported that sectoral and firm-level caps on borrowing for financial closure of power projects were to be relaxed.
Financing is still largely from public sector financial institutions and large infrastructure programmes simply cannot be funded by mechanical financial rules especially in a sector like power,where each project is a Goliath. Also there is to be rethinking,reportedly,on both allocation rules and pricing for inter-regional transmission of power. The sooner we realise that the energy problem will resolve itself if we firmly follow the rules laid down in the Electricity Act,which provides the structure for both a market for investment in power and a market for sale and purchase of electricity,the better off we will be. Politics is blamed. No. Technical weaknesses and an inability to operationalise the reforms are to blame.
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,dont 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 dont 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. Thats 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 cant 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. Lets 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 thats another story.
The writer,a former Union minister,is chairman,Institute of Rural Management,Anand express@expressindia.com
