In the mid-1980s, the price of a thermal power plant was Rs 1 crore per megawatt (mw). The power reforms of 1991 only opened up generation to private participation, leaving the state utilities to buy power from these private power plants. The tariff was to be calculated by the Central Electricity Authority on the basis of a cost-plus formula. Doubts about the state utilities? capacity-to-pay were set at rest by a payment guarantee by the state government, backed by a counter-guarantee of the Centre.

The cost-plus dispensation and the guarantee regime led to certified costs going up to Rs 5 crore per mw. Later, the entire scheme collapsed, and the price of thermal plants crashed to Rs 1.75 crore per mw in the late 1990s. This is a typical problem with cost-plus schemes. They lead to costs getting heavily padded by operators, with correspondingly high tariffs best described as exploitative.

Recall that the telecom sector saw explosive growth only after the regulator moved away from cost-plus regulation to competition regulation in 2003. The regulator and the government also moved to lower levies, adopting a technology agnostic stance and delivering a level-playing field. Investments shot up and the private sector?s network presence expanded from 20% in 2003 to 70% today. Even public sector services grew much faster after that.

Something similar is needed now in the power sector. Unless a level-playing field is enforced and public-private partnerships encouraged, investments will simply not take place. Despite power reforms, the sector?s private participation has stagnated at 5% share of the power network. There is no competition, and power remains a state monopoly.

Efforts have been on to improve matters. In 2006, the government moved to mandatory competitive price bidding for power generation. By 1997, the government had realised that power reforms have to be comprehensive, and so, an amendment of the Electricity Act in 1998 led to the unbundling of the power network into its constituent parts of generation, transmission and distribution, and the setting up of regulatory commissions. A whole new Electricity Act was passed in 2003, leading to specific provisions for trading, open access, competition and so on.

The Centre appears to have done everything it could. It has passed new legislation. It has notified competitive tariff bidding. It has also prescribed a 20% margin over the cost of generation both ways between different consumer classes to be achieved in five years, thus making transparent ?open access? regulation a simple exercise.

Yet, open access has been left largely unimplemented, and the central regulator seems to be passing the buck to state-level control over distribution. To my understanding, this is an attempt at fudging the issue, since the central regulator does have the power to enforce open access. The fact is that the Centre controls 100% of all power transmission in India, and has control of the dispatching of power to different states. It also has 40% of generation under its charge. It is quite easy for the central regulator to issue regulatory notifications with default provisions if the states do not comply with open access norms. It can also draw up a five-year plan of reducing network subsidies to errant states. Its dispatch control also gives it a handle on the latter. Plus, there are numerous other means that can be employed under the Act to have its provisions enforced.

The regulator cannot wait in perpetuity for a governmental go-ahead for this. If the Parliament had desired such an arrangement, it would have sanctioned an additional post of a joint secretary in the ministry of power, looking after regulation, rather than have undertaken the cumbersome exercise of passing comprehensive reform legislations in 1998 and 2003.

The Parliament has granted the central regulator full security of tenure (unlike telecom, where the regulator?s chief can be dismissed after a single show cause notice). Yet, if the incumbent officer is too politically hamstrung to do what?s best for the power sector, it can only be termed tragic.

Unless grid capacity increases dramatically, all we will have is more captive generation plants coming up. The lack of open access would keep the entire network subdivided into discrete islands of power with no link-ups and very little overall grid efficiency. India?s grid power capacity is 134,000 mw, and captive power plants have aggregate capacity of an estimated 20,000 mw.

On top of this, there are many stations of under 1 mw that have mushroomed across the country, estimated to total 15,000 mw. It?s all in little pieces, with low overall efficiency and very high wastage. It is high time the power regulator starts exercising its vast powers to integrate this ramshackle network.

The Parliament and the Centre have done their jobs. The big power switch is now with the man charged with the task of implementation.

?The author is a former senior bureaucrat. These are his personal views