Get the basics right

Updated: Jan 5 2006, 05:30am hrs
When the private power policy was initiated during 1991-92, it was envi- saged that the power projects would be basically state projects, selling power to the state grid. It was, however, recognised that we were required to add more than 10,000 mw every year for the next 10 years to meet the growing demand, which was an onerous task. Moreover, coal was basically located in eastern and central India, whereas hydel power potential was concentrated in the northeast & the north. The demand for power was in the southern and western regions of the country. It was, therefore, felt that unless mega power projects were set up in regions having coal and hydel potential, we would not be able to tackle the increasing demand for power. Establishing mega projects in coastal regions based on imported coal was also considered a feasible option. The mega projects would be composite projects and include development of the linked coal mine. It was also recognized that the state in which the mega project was to come up may not always be able to absorb the total power, thus requiring the promoters to enter into power purchase agreements with more than one state. Since it would involve a number of states, it was felt desirable to have a central organisation to play a coordinating or facilitating role and provide escort services to the promoter.

In fact, an MoU was signed between seven states and a Honk Kong-based firm to put up a 10,000 mw project at Hirma in Orissa, in two phases. A coal mine was identified in Mahanadi coalfields. Negotia-tions were held regarding fixation of rates and transmission network was also identified to facilitate transmission of power to various states. In spite of considerable work done in promoting the project, it could not take off.

This is only to remind us that mega projects have mega problems.

The power sector has not been able to inspire confidence of private investors, whether Indian or multinational companies. A major reason being that the sector continues to be plagued with high T&D losses, rampant theft, non-remunerative rates, high subsidies, free power to the agricultural sector and vote bank politics. And, above all, the slow pace in reforms to establish viability of the sector and inspire confidence about payment security to investors. Funding of projects, including generation ones, does not seem to a major constraint at all. Unless the power sector a a whole is put on a sound financial footing, the progress of an Ultra Mega or Mega Power Policy will not produce the desired results, even though power trading and import of coal are favorable factors.

The writer is a former Union power secretary