Power: Delay in reforms

Editorial in The Hindu, Article from Financial Express

As per the Electricity Act 2003, the state electricity boards (SEBs) were to be unbundled by 10th June 2004. Now an extension of one year has been granted to Himachal Pradesh, Meghalaya and West Bengal, while an extension of six months have been granted to Maharashtra, Punjab and Chhattisgarh. Two months of extension has been granted to Assam. Kerala and Tamil Nadu have requested for a one-year extension while Bihar and Jharkhand are expected to ask for the extension as well, and in all likelihood these extensions will be granted.

Besides these extensions, the CMP even talks about reviewing the Electricity Act 2003 itself.

What was the idea behind unbundling of the state electricity boards into power generation entities and power distribution entities? Poor administration of state electricity boards and massive subsidies resulted in a loss of over Rs. 26,000 crores across all SEBs. Private power generation companies refused to set up shop in several states fearing that the state electricity boards will not have sufficient monies to pay them. The state governments by themselves didn't have sufficient money to invest further in generating more power. The demand for power has however been on the rise - both the domestic demand and the industrial demand, resulting in a massive gap between demand and supply.

This resulted in the previous NDA Government to bring in the Electricity Act, 2003. The salient features of this act are:

• Each state will set up a State Electricity Regulatory Commission for determining the tariff structure for that state
• Unbundle the Electricity Board to delink transmission and distribution from power generation
• Meter power consumption by all users - including the farmers
• Reimburse all subsidies incurred by the Board so that its finances are strengthened

This would have resulted in private power players showing enough confidence in entering the state for increased production of electricity in those respective states. However, the current extensions as well as the fear of 'reviewing' the act is making the private investments in power sector jittery.

Though Chidambaram has talked about financial closure of close to 3,700 MW capacity, and another 6,867 MW in the pipeline, unless the Central Government takes a strong stance on Power reforms, none of the new power projects will fructify.

While it is understandable that Farmers need to be given subsidy, it is difficult to justify providing subsidies to regular domestic users, as has been done by Tamil Nadu Government recently. The people in the state as well as the opposition parties hail this decision. However they do not realise how damaging the consequences will be. There will be continuing power cuts, making the life of common man miserable. Several villages will never ever be electrified. Industrial production will take a serious hit, resulting in less creation of jobs. The so called IT revolution will simply not happen as fast as it could, as electricity is the most basic requirement for the computer to function!

I live in a comfortable locality in Chennai (Gopalapuram). There is hardly any power cut and with the help of inverters and batteries, we handle any power cut quite comfortably. However the situation across the state is pitiable. There are parts of the state where there is a daily power cut of more about 3-4 hours. Some more places only get electricity for about 4-6 hours. And as I remarked earlier, there are several villages with no power supply whatsoever.

All because the people seemingly want cheap and unsustainable electricity and the irresponsible government is willing to mollycoddle its people.

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