The first generation reform in the Indian power sector
started, in true sense of the term, with the enactment of Electricity Act 2003,
though it would be technically correct to say that theoretically the power
sector reform commenced from 1991. Unfortunately, since the approach was
flawed, the whole reform initiative achieved little results. The series of
legislative and policy initiatives undertaken during the Tenth Plan brought the
required response and vibrancy in the power sector. It would, however, be wrong
to say that we have achieved what we needed and what we should have achieved.
The modest success delivered through the various policy instruments has been
able to attract substantial public and private sector investments. To sustain
these and to further scale up, we need to be doing many more things.
Second Generation Reform in the Power Sector should cover the
We must ensure full
implementation of the Electricity Act, National
Electricity Policy, Tariff Policy and other important
policy instruments. Important pending issues include
reorganization of the remaining Electricity Boards, Open
Access in Distribution, minimising cross subsidy in
terms of Tariff Policy etc.
We need to interact with
industry to get them to participate in bringing about
larger competition in electricity sector. Multiple
Distribution Licensees in the same area of supply to
bring better and efficient technology and to offer
options to consumers could transform the shape of this
industry. The relevant provision of Electricity Act, in
this regard, has remained untouched in implementation.
Open Access in Distribution, mandatory from January
2009, has, in effect, remained highly restricted in actual implementation. If
the element of cross subsidy surcharge and a less than required supporting
environment at the State level are standing in the way, we need to get over
these through persuasions. If this approach does not work, even the Act may be
Section 11 of the
Electricity Act has been interpreted by couple of States
in a manner that negates the very objective of
developing electricity market. If required, the
provision may be suitably amended so that any likely
interpretation against the spirit of the Act is
Tariff Policy has adequately
highlighted the advance effect of "Free Power". But, a
few States have resorted to this. If a State wants to
help certain needy consumers, there should be more
transparent way of providing targeted subsidy. Even if
this requires a provision in Electricity Act, the same
could be considered, though I do feel that this could be
done through other administrative actions.
Delhi Model of Distribution
has been finally vindicated. We need to encourage more
of the cities and towns to adapt this model so that
financial burden on State due to high losses could be
avoided after going through a transition of a few years.
More than one company in the same city does provide a
competitive pressure on these companies to improve
performance and quality of service.
Bhiwandi Model of Franchisee
has also demonstrated its success. If not privatization,
the Franchisee Model could be implemented in all such
towns where the Distribution utilities have not
succeeded in reducing the loss below 25%. There are
large number of such towns in the country, may be more
than 500, where such a situation exists. If this is not
done, it is unlikely that financial health of the
sector, in many States, will improve.
Franchisee in rural area is
a requirement of the Rajeev Gandhi Grameen Vidyutikaran
Yojna (RGGVY). It is not being implemented in most
cases, as required under the Policy. States not
implementing this in letter and spirit may have to be
denied the benefit under the Scheme.
In spite of large capacity additions, it is quite likely that rural India
will continue to be subjected to usual load shedding. Decentralised Distributed
Generation, as provided under the Rural Electrification Policy (2005), of the
Government of India, is a practical solution to this problem. However, this
will need to be facilitated by the Government of India, in close coordination
with State Governments, in the same manner as was done for Ultra Mega Project.
In Transmission Sector,
involvement of private sector has to increase, as has
happened in case of generation. Somewhat more
imaginative and supportive actions by Government of
India and State Governments will be needed for this. We
need to recognize that Merchant Plants, Captive Plants,
and projects being developed to respond to Case 1
Bidding, can transform the competitive character of this
industry. But, a robust and reliable Transmission
Network, more than adequate in capacity, will be needed.
Regulatory Institutions have a major role in transforming this sector. A
few developments, here and there, in past few years, do give reasons for
concern. Selection, accountability, transparency, particularly in view of
multiplicity of Electricity Regulators (in all States), are areas which will
need to be kept under watch for appropriate and timely correctives.
Government owned power
companies, when brought into the equity capital market,
during 2003-2007, for the first time, have shown that
not only adequate fund could be generated for their
expansions, but also there would be qualitative changes
in the management and governance. This initiative needs
to be extended to power companies controlled by the
50,000 MW Hydroelectric
Initiative, launched in 2003, did make a visible
difference. The process, however, is slow in
implementation. Better coordination with State
Governments is required. We need to launch another
50,000 MW Initiative to cover the remaining projects.
Energy Efficiency and Demand
Side Management, launched through Bureau of Energy
Efficiency, set up in 2002, have made significant
impact. These need to be scaled up, particularly at
State Government level, with focused attention and
Bilateral cooperation in
power sector could create a win-win situation for the
countries in this region. Hydro potential of Bhutan,
when tapped in the form of a few hydroelectric projects,
has proved to be of immense value to both India and
Bhutan. Cooperation with Nepal, India, Myanmar could
lead to unlocking these potentials for mutual benefits
of all. Country-to-country Transmission Links would lead
to optimal use of energy.
Power sector reform initiatives, in order to deliver
desired results, need to be backed up with commensurate reform movements in the
related sectors, particularly fuel. Efforts of Power Ministry have led to right
movements in the manufacturing sector. BHEL has expanded, is expanding further,
and many other manufacturing facilities for power plant equipment are coming up.
These should lead to India having a domestic manufacturing capacity of the order
of 25,000 MW per year in next two to three years. However, movements in the coal
sector need to be particularly initiated and implemented. Liberalisation of
Captive Power Policy has been in the right direction. What is needed is further
opening up of the coal sector.
Development of power sector is dependant heavily on the approach which is
adopted by the environmental regulatory systems. If they take a pragmatic view,
without adversely affecting the environment, substantial progress could be
made. However, if the view and approach become too conservative and too
unfriendly, it can jeopardise the whole growth of the Indian power sector, in
turn leading to a serious set back for India's ambition to achieve a double
digit economic growth rate.