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This is not a lasting solution

Punishing officials for overdrawing power is a treatment of the symptom, not the disease.

india Updated: Aug 21, 2012 01:05 IST

The power ministry is pitching for stricter penal provisions against states overdrawing power after it emerged that this was the cause of last month’s grid collapse. Three states were drawing electricity from the northern grid by up to a quarter more than their quota on July 30, the day of the first outage. They were still drawing in excess the next day when two other grids — from which power was being drawn to revive the stricken zone — collapsed as well. Improved discipline is necessary to prevent a recurrence, as is greater vigilance over grid protection systems. Along-side a proposal to ring fence cities like New Delhi in the event of a blackout, these are the actionable points from the ministry’s investigation into the latest incidence of grid failure. The measures are necessary to make the country’s power transmission network less vulnerable to demand spikes, but they do not go into the chronic supply shortage that remains its biggest threat.

The government severely distorts both the demand and supply of electricity. State-owned distribution utilities are forced by their political masters to subsidise power to farmers. These utilities are groaning under a mountain of IOUs to electricity generation companies, which in turn find no reason to expand capacity if they are unlikely to be paid for the power they produce. And those that persist in this heroic endeavour have to grapple with a restrictive State monopoly over mining coal, the fossil fuel most commonly used in Indian power plants. A recent government audit over the allocation of captive coal blocks to select companies has revived the debate over the need to persist with the inefficiencies of a nationalised coal mining industry. For India to move to a market-driven power sector, the price and feedstock restrictions must go. The states will have to be weaned off their populism. The Centre has made some progress by urging them to corporatise their power distribution businesses, but many power-deficient states are holding out. The Centre, on its part, must take a call on coal shortages.

Punishing officials for overdrawing electricity from the transmission grid, as power minister Veerappa Moily has suggested, is essentially a treatment of the symptom, not the disease. At either end of the power deficit lies a political question that officials are incapable of answering. If it is penalties Mr Moily is seeking, he need look no further than those imposed by prices in a free electricity market. This newspaper has argued earlier that India’s power sector needs competition in all three areas of the business — generation, transmission and distribution — to enhance productivity and contain leakages. It also needs an independent watchdog that can withstand the political pressures playing on different links of the nation’s power supply chain. Finally, electricity prices must be freed to make consumers more responsible for the electricity they use.