Power Ministry Says No To IIM-A Idea Of CEA-CERC Merger

Mumbai, March 4: | Updated: Mar 5 2004, 05:30am hrs
The Indian Institute of Management - Ahmedabad (IIM-A) has called for merger of the Central Electricity Authority (CEA) and Central Electricity Regulatory Commission (CERC) on the grounds that technical and economic regulatory functions need to be carried out in close coordination.

Even though the Electricity Act (EA) 2003 envisages separate identify for CERC and CEA and we also feel the necessity of separation in the short run, the two regulators should be merged eventually, as there are substantial synergies between them, IIM-A said in its report on CEA restructuring submitted to the power ministry. Sources told the FE that the IIM-A report was discussed threadbare at the recent meeting convened by the power secretary RV Shahi.

However, the power ministry has flatly rejected IIM-As recommendations in this regard and observed that the tariff fixation is in the exclusive domain of electricity regulatory commissions (ERCs) and no other entity or government has any role in this regard.

EA 2003 gives CEA the mandate of an ERCs advisor to the Centre in all technical matters, including measures for reducing cost of power. The advisory has been left at the wisdom of ERCs.

It is true that CEA has acquired technical expertise over the years. However, to say that no other body (especially ERCs) has such domain knowledge at all, is not a just presumption. Even the techno-economic clearance (TEC) of CEA have been fallible in the past. Moreover, the role given by the statute to the ERCs and the aspirations of public at large are sufficient for them to be just and equitable. The same has been borne out of experience too. There is no compelling reason, therefore, to think otherwise, the power ministry said.

According to IIM-A, during the transition period, the CEA should be divided into CEA-1 (regulatory role) and CEA-2 (advisory role). CEA under the technical role would have to ensure choice of appropriate technology in the power sector. CEA-2s developmental and advisory functions would arise from financial and organisational weaknesses of the state electricity boards and discretionary decision making in the government.

However, the power ministry is opposed to such separation on the grounds that it was unwarranted. EA 2003 provides the roadmap for reforms and growth of the sector. It provides for transparency in operations, ushering in an era of open access, doing away with licensing, giving freedom to operators over the choice of technology. Removal of the techno-economic clearance of CEA is part of the liberalisation of the sector. There is no compelling reason to go back on this issue, the power ministry noted.

Moreover, the power ministry has observed that IIM-As suggestion to bifurcate CEAs two roles as that of regulatory and advisorial is not acceptable as EA 2003 does not envisage any role for the government in tariff matters which is the sole prerogative of independent ERCs. According to IIM-A, CEA should become an independent entity within as short a time period as possible and it should be allowed to charge such a fee as a first step towards becoming an independent regulator.