Over the last few days, IDFC has been organising interactive sessions between a high-level delegation from the Argentine power sector and senior officials of power ministry, state electricity boards and financial institutions.

Argentina had kicked off power sector reforms in 1990, at almost the same time India decided to open up its power sector and under similar conditions. But unlike India, the reforms were effective and Argentina was able to change the topography of the power sector drastically.

Argentine power projects have taken off without state guarantees and escrow facilities, based on their cash flow system alone, which is the major problem haunting Indian power projects fromachieving financial closure.

Since the reforms process started in Argentina in the early nineties, power prices have stabilised at half the privatisation levels, system reliability has increased substantially, distribution companies have increased their customer base by over 20 per cent and the sector is attracting fresh investments of nearly $1 billion annually.

"From a shortage situation of just four hours daily supply of power in 1991, we are planning to export 20 per cent of the power to neighbouring countries like Brazil, Chile and Uruguay by 2000," said Juan Legisa, president of the National Electricity Regulatory Administration.

IDFC's power sector advisory group, which plays a key role with power ministry in untangling structural issues that hold up power projects from taking off, had invited the Argentine group at the behest of the power ministry. The delegation included, apart from Juan Legisa, the head of Argentine power industry regulatory body, Juan Luchillo, the chief operating officer ofthe wholesale electricity market administration company and heads of major Argentine private power producers.

Speaking to the press, IDFC executive director Nasser Munjee said that the Argentine experience holds a lesson for India. "To begin with, it is possible for the state governments to implement structural reforms that will enable power to be generated and traded like a commodity. Many state governments are getting ahead in their efforts to privatise power distribution, which will enable a power project to be financed without recourse to state guarantees and escrow covers," Munjee said.

After the reforms, Edenor, the largest private distribution company that supplies electricity to the northern part of Buenos Aires, has reduced distribution system losses from 30 to 10 per cent. Today, major suppliers can directly buy their electricity requirements from any supplier of their choice, through a wholesale electricity market. Like manufacturers of any other commodity, private power producers have toaccess the demand for their product before they make any investment decisions and operate efficiently so as to attract customers.

The Argentine experts are of the opinion that their success was mainly attributable to the following three reasons. First, the reforms in the power sector were taken up at a time when the entire economy was being liberalised. Second, the Argentine government had a clear vision of the post-reforms structure of the industry, in terms of the needs for competition in generation and regulation to safeguard customer interests. Third, the government sought private sector participation not for merely supplementing investments in the sector, but as an essential element of the overall strategy to improve efficiency.