Speaking at a conference on private sector participation in infrastructure on Friday, Pandit said the government was trying to work out how the private sector could be involved to the fullest. The government has targeted the year 2012 for a national grid. In order to achieve this target, the private sector had to be involved in a big way as huge investments were required, Pandit said.

The government is also trying to work out a taxation policy for the three areas of generation, transmission and distribution. Post-unbundling of all the three areas, the sectors would not remain steeped in losses, he said. Therefore the government had to decide how to tax the profitable sector and at the same time not keep any differentiation as far as the three sectors are concerned.

The government is in the process of working out a plan whereby the National Thermal Power Corporation will build greenfield projects and hand over the existing plants to be run by the private sector. This would happen in a gradual process in the form of a chain reaction where when one plant was built, one plant was handed over to the private sector, Pandit said.

he said that the government had realised that it began the privatisation of power from the wrong end in 1991 when it invited the private sector in generation, he said. Privatisation of power should have begun with transmission because in today's scenario, scores of companies were sitting with signed power purchase agreements but power generation was not improving.

Pandit defended the mega power policy by saying that it was designed in view of the massive power shortage facing the country. It was felt that power from mega projects should go to towns which had a population of one million and had embarked on the exercise of privatisatising distribution of power in the city, he said. But it was later decided to include the surrounding towns as well as the state governments objected to the mega projects pocketing the best distribution circles, he said.

The government visualised Power Trading Corporation (PTC) to become a stock exchange of power where power can be sold on a spot basis, Pandit said. PTC by buying power at the best price available during the day would ensure that consumers got the best choice, he reiterated. It was a sorry state of affairs that the eastern region was surplus with about 3,000 mw of power and it could not be transmitted to power-short areas.

Chairing the session at the seminar, country director of World Bank Edwin Lim said that privatisation of power was a tricky affair as the power purchasing agencies ie the state electricity boards are completely bankrupt. And the central government should initiate bankruptcy proceedings against such SEBs because they were non-bankable, he said.