The power game: Maharashtra vs Chhattisgarh

Updated: Jan 28 2002, 05:30am hrs
Last week, this paper argued editorially that the Maharashtra state electricity boards ability to pay, was key to the successful sale of Enrons Dabhol Power Company. Ironically, on the very same day, MSEB Chairman Vinay Bansal, a man who was fighting to ensure that MSEB did not tie itself up in another unworkable deal, was transferred to Delhi. On the face of it, the government could argue that Bansal has an attractive new posting as Additional Secretary in the commerce ministry, but it is no secret that he was being thwarted and stymied in all attempts to clean up MSEBs losses. From ordering electricity meters to cracking down on defaulters, cutting subsidies, raising tariffs or avoiding an unviable re-negotiation of the DPC deal, the government has constantly set up obstacles.

There were other transfers too. Energy Secretary Vinay Mohan Lal, known as a tough administrator was the first to go, followed by MSEB secretary Vidyadhar Kanade, a confidant of Bansal. Also, the judicial inquiry ordered into the Enron deal and its re-negotiation has yet to get off the ground. That was just the beginning. Within hours of announcing Bansals exit, the state government has reportedly agreed to resume purchase of power from DPCs 740 mw Phase-I. It has also agreed to concede a 1000 mw distribution zone to whoever buys the Enron stake.

This could be suicidal for Maharashtra. A hasty resumption of power purchase could seriously jeopardise MSEBs case in rescinding the DPC agreement. Secondly, power cannot be purchased under the old power purchase agreement, which has been officially repudiated. Thirdly, a lower, interim power tariff could be fixed until DPC changes ownership and a new PPA is signed, but only with Enrons concurrence. A fourth possibility is that financial institutions could attach Enrons assets, take over the plant and sign a deal with MSEB. None of these developments having occurred so far. Moreover, although Enron may be down and out globally, it is certainly not conceding an inch in the litigation with MSEB that is being heard by the Bombay High Court. Before any hasty decisions are made, the people of Maharashtra have a right to know that their interests are not being compromised by avaricious policy makers in buying power from DPC during the pendency of litigation. This could have serious monetary implications during litigation.

Also, MSEB should only be allowed to concede a distribution zone with specific clearance from the Maharashtra electricity regulatory commission and after it outlines the readjustment of tariffs and future profit projections. The area demanded by DPCs potential buyers is MSEBs most lucrative zone where it collects almost Rs 6 per unit from high-tension industrial users. The rest of the state includes large areas where subsidised power is sold at as little as 50 paise per unit. MSEB sources say that giving away a 1,000 mw distribution zone should easily double tariffs for the rest of the state. They wonder how Maharashtra can agree to the condition and at the same time oppose MSEBs proposal to hike tariffs.

Maharashtra chief minister Vilas Rao Deshmukh has reportedly told the finance minister that so long as it is freed from the 1,400 mw, Phase-II obligation, it would be happy to restart Phase-I and meet other conditions. This attitude bodes ill for the future of the state. Expensive power will drive out industry faster than it already has. Maharashtra, which is still coasting along on past glory refuses to admit that its industrial growth is flagging and it needs to reverse the trend. Although it was recently ranked as the state with the best industrial climate by a CII-World Bank study on competitiveness of Indian manufacturing, the authors of the study would themselves concede that the state no longer exhibits any dynamism or direction. Sadly, while Maharashtra flounders, other states are making concerted attempts to catch up with it.

A simple example would be the fledgling state of Chhattisgarh, which is also ruled by the Congress party and shares a small border with Maharashtra. After a disastrous, anti-industry attitude during the BALCO disinvestment, its chief minister Ajit Jogi is apparently working overtime to make amends and to attract investment. This power surplus state, with one of Indias largest resources of coal, is attempting to turn itself into a sort of power-hub for the northern and western regions. Shailesh Pathak, managing director of the Chhattisgarh industrial development corporation, claims that the state already has excellent power evacuation infrastructure and is marketing itself as a base for setting up thermal power stations by other states. These will then be allowed to export electricity at a far lower cost than transporting coal. Chhattisgarh, already exports 300 mw of surplus power to two other Congress ruled states 100 mw to Delhi and 200 mw to Karnataka at Rs 2.80 per unit. Unhampered by excessive bureaucracy, it claims some important breakthroughs. It has signed a memorandum of understanding with the Gujarat government to set up a 500 mw coal based pithead project. The deal is that the Gujarat government will evacuate its share of net power output from the project through the western grid transmission system or through a transmission system dedicated to companies nominated by it.

It is signing a similar deal with the Delhi government to set up a 1,000 mw project to export power, of which 210 mw is expected to be ready in three months. Its biggest project is a mega deal with the National Thermal Power Corporation for a huge 2,500 mw project (split into 1,980 mw Phase-I and 660 mw Phase-II). The big selling proposition is its large coal resources that allow it to produce the cheapest power in the country. Whether Chhattisgarhs enthusiasm is backed up by an ability to execute its plans without glitches remains to be seen, but its advantage as a brand new state is that it can make a fresh start without the stifling burden of inherited red-tape. At the same time, it could just as easily blunder. A decision to set up a group of ministers to assess the gains and costs of providing free electricity to different consumer groups, should be setting off some alarm bells. But the key is that Chhattisgarh and a couple of other states are trying harder to catch up, while numero uno Maharashtra seems determined to mess up.

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