By Vijay Chhibber
As the ‘dance of democracy’ plays out, a debate on opportunities captured or missed during the outgoing government’s tenure is inevitable. A focal area of the NDA has been its work on the infrastructure sector. There has been a marked step-up in the scale and speed of implementation, albeit with varying degrees of success across sectors. Roads and railways have demonstrated visible gains towards achieving global standards. But relatively slower progress was seen in ports, inland waterways, water management, and power transmission and distribution sectors. These verticals should be the obvious areas of focus for the new government.
The power sector has been a mixed story. There have been massive gains in generation, leading to a power-surplus status. Successful implementation of Deen Dayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme and Pradhan Mantri Sahaj Bijli Har Ghar Yojana ‘Saubhagya’ will lead to exponential growth in per capita consumption of electricity. But such major demand increase can only be met if transmission and sub-transmission elements of the grid are strengthened. As was evidenced by a lukewarm response to renewable auctions last year, the strength of the transmission grid to evacuate necessary renewable capacity is questioned by renewable developers themselves. A strong focus is needed not only to ensure a robust and resilient grid, but also the success of the renewable mission.
The tariff-based competitive bidding mechanism has led to innovative practices in transmission sector, and resulted in tariff 30-40% lower than the regulated one. A key principal of promoting competition is symmetry of information availability, which ensures a level-playing field for all players.
The Electricity Act provides for a central transmission utility (CTU); it can be any government company responsible for undertaking transmission of electricity through interstate transmission—it should be responsible for planning and coordination of interstate transmission. PGCIL, a PSU registered under the Companies Act, has been playing the dual role of a planner, as a CTU, and of a transmission developer. With tariff policy seeking all transmission projects to be executed through competitive bidding, concerns arise on the conflict of interest in this dual role. It’s evident in the constitution of the National Committee on Transmission (NCT) and Empowered Committee on Transmission (ECT)—the deciding bodies with regard to the route of allocation of projects.
The CTU has a symbiotic relationship with PGCIL and the interface between the two is opaque. Projects awarded on regulated tariff mechanism (RTM) are decided by the ECT, of which PGCIL is an integral part. Projects identified for award under the RTM route are automatically awarded in favour of PGCIL. Even in projects awarded through the bidding route, there is asymmetry of information, which disadvantages the private sector in the bidding process.
PGCIL, as a CTU, influences technical standards specified in tender documents for competitive bids. The CTU, along with the Central Electricity Authority (CEA), works out technical specifications (tower designs, conductor type, etc) for each transmission project, which, along with PGCIL’s role as a developer, potentially distorts the level-playing field.
We need to segregate embedded functions into independent functions of planning, development, operations. The government has carved out a critical function of grid operations from PGCIL and created POSOCO to manage the grid. The next step should be creation of an independent CTU completely at arm’s-length from any developer, including PSUs. This new institution should be entrusted with network planning, coordination, bidding and revenue recovery functions. Its efforts must focus on advance planning, and support developers in obtaining all statutory clearances including Right of Way. This will result in improving the pace of award of projects as well as qualitative improvements in efficiencies of design, technology and costs for the consumer.
The National Highways Authority of India (NHAI) is a perfect analogy of an institutional framework that has delivered rich dividends without any conflict of interest. The NHAI, in its only role as the planner of national highways, has resulted in meaningful and sustainable change in both quality and pace of infrastructure development.
The new government must include the CTU’s revamp in its 100-day agenda. Once the institutional framework is set right, all other imperatives will receive their due attention in a coordinated and sequenced manner.