Is there light at the end of the tunnel?

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Saturday , October 27, 2007 at 0416 hrs distribution is predicated on regulators restructuring cross-subsidy surcharge, wheeling charges and flexibility to determine tariff for enabling contractual arrangements with dedicated consumer groups. I am afraid this is beyond the mere regulatory domain. It needs kindling the missing political will. It is this which has delayed greater recourse to open access driven by the clout of the dominant monopoly of the state electricity boards (SEB) in view of their persistent inability to withstand competition. These SEBs will continue to lobby to hinder open access, since the beneficiary consumers are dispersed and cannot counteract the power of the dominant monopoly. The Centre needs to deal with this more firmly, rather than leaving it in to the state regulators.

Third, the current level of AT&C losses amounting to Rs 47,000 crore per annum has been readily recognised as the weakest link in the power system; and the commitment to reduce it to 15% in the APDRP projects needs concerted action. Of course using IT applications for improving the energy audit and franchising distribution is the right route to follow. However, in the past such incentive schemes have not worked. No doubt the adherence by all states to fiscal responsibility in order to avail the benefits of debt rescheduling, disciplines state finances putting them under pressure to reduce subsidies to the SEBs. Nonetheless tariff rationalisation, which increases in many cases, is so deeply embedded in the populous psyche of competitive populism that frequent electoral cycles derail any systematic and sustained effort for a reasonable length of time to make a qualitative difference. De-politicising electricity tariffs requires broader bi-partisan support. Unless the mainstream players are willing to act collectively, it will be unduly optimistic to expect significant positive outcomes. In managing this problem we recognise this is crucial for improving the health of the sector as well as the fact that it is necessary to attract significant private investment. Private investment without a Letter of Credit or some kind of guarantee mechanism, irrespective of their nomenclature, becomes a necessity for private investors to secure financial closure. Nonetheless, mere cocooning and creating firewalls for individual power projects, (mega or ultra) from the more endemic issues of power reforms can only yield short-term benefits.