One Step Backward, Two Forward

Updated: Aug 31 2004, 05:45am hrs
As the UPA completes 100 days in office, its a mixed bag when one looks at the power sector. There is a lurking fear in some quarters that the UPA has put the clock back on power reforms. The first shock for reformers came with the return of the free power to farmers raj in Andhra Pradesh, followed by Tamil Nadu and Maharashtra.

The next shock came when the Common Minimum Programme decided to review the Electricity Act, 2003 (EA 2003) in view of the concern expressed by a number of states, a euphemism for the pressure mounted by the Left. The government subsequently extended the mandatory date of June 10, 2004 for unbundling and replacing state electricity boards (SEBs) for another year. However, power ministry sources maintain that power reforms are well on track.

The CMP has also reiterated the UPA governments resolve to increase the role for private participation in generation and distribution, they say. According to them, EA 2003 has made it clear that states can provide free power to any section of consumers it wished to, provided SEBs were compensated in a transparent manner. If state governments are making budgetary provisions for power subsidy, it is well within the purview of the Act, though it would put an additional burden on their precarious finances, they say.

The UPA government talks about reforms with a human face in the power sector. Rural electrification tops its agenda. According to a statement by the power ministry in May, which summed up UPAs power policy, the government is planning to strengthen the Rural Electrification Corpora-tion (REC) to provide quality power to 56 per cent of rural households that do not have access to electricity.

On generation, it has underlined the need to achieve the 10th Plan target of 41,000 mw and the 11th Plan target of 60,000 mw. It has also called for a long-term action plan to add capacities of 1,50,000 mw. The capacities slated to come up in both the public and private sector are expected to bridge the peak load shortage. More importantly, the government has promised all possible support to IPPs for achieving early financial closure so that the capacities being planned in the private sector would be in place as per schedule.

On the transmission front, it calls for augmenting inter-regional transmission capacity to 30,000 mw by the end of the 11th Plan. On the distribution side, the UPA has banked on improving efficiency by a combination of technical and corrective steps besides expediting the Accelerated Power Development and Reform Programme. A set of policies such as National Electricity Policy, Electricity Tariff Policy, Rural Electrification Policy and Policy on competitive bidding are expected to be announced soon.

In fact, the government has not succumbed to the pressure mounted by Left parties, and is going ahead with disinvesting a part of its equity in the National Thermal Power Corporation as planned.

While it is possible that the ghost of free power may haunt reforms for more reasons than one, it is also true that the new policys thrust on rural electrification would go a long way in changing the face of rural India. The reforms planned in the distribution and transmission sectors may also ensure plugging of leakages, which is equal to enhancing existing capacity significantly. Considering the cost of unserved electricity on economic growth, which is 1.5 per cent of GDP, these savings would spur further growth.

In short, it is one step backward but two steps forward for the UPA in these 100 days. But if the government translates its words into deeds, the power scenario in the country may change for good -- of course, provided the government gets no further shocks from the Left.