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Empower power

The Govt envisages power for all by 2012. This is a tough target but can be achieved, writes Ravi Sharma, President, Alcatel South Asia.

india Updated: Feb 23, 2006 19:36 IST

The role of infrastructure for a nation’s development can’t be over-emphasised. Economists say that a country can grow at an addi tional rate of 2-3 per cent with proper infrastructure in place. With a GDP growth rate of over 7 per cent in the last few years, there is increased demand on the country’s already stretched infrastructure. While infrastructure growth has been slow, a sector like telecommunication has boomed — its evolution has been unparalleled.

The National Telecom Policy in 1994 showed that a robust telecom infrastructure (capable of delivering cost-effective and reliable services) has a multiplier effect on the economy’s growth. Recognition that setting up the capital-intensive telecom infrastructure was beyond government capacity ensured that the sector was opened up to private players. With the entry of private players, the cellular mobile industry grew from a base of 1.25 million subscribers in March 1999 to over 80.6 million subscriber as of January 2006. The success can be attributed to a healthy and conducive ecosystem provided by the government — DoT’s policies, TRAI’s regulatory control and the TDSAT’s role. The idea is to derive learnings from the telecom ecosystem and map them onto the infrastructure sector.

Infrastructure is both a driver and magnet for investment. The government is focusing on creating a regulatory and policy environment on the lines of the telecom industry. This needs to be expedited. The govern ment envisages power for all by 2012. Around Rs 246,000 crore of proposed investments in the next five years is expected. This is a tough target and requires several reform measures.

While telecom has control only at the central level, power is decentralised. Intra-state tariffs are the responsibility of State Electricity Regulatory Commissions (SERC). The situation at the state level is dismal, with the State Electricity Boards (SEBs) cash-strapped due to non-remunerative tariffs and irregular subsidy payments. This, in turn, results in their inability to invest in capacity additions or system upgradation. The SEBs coffers are bleeding, mainly due to transmission and distribution (T&D) losses and power thefts.

The SEBs need to be unbundled into generation, transmission and distribution entities with separate bodies to handle each unit. As of date, only nine states have unbundled their SEBs. The primary focus needs to be on T&D.

The Budget should make provisions for the procurement of high quality equipment that would minimise losses. Stricter policies are needed to curb power thefts. Metering technology must be improved to include remote meter reading and theft/tamper-proof meters. This has proved successful in European nations ensuring faster rev enue collection and minimal levels of theft.

Effective project implementation is a key concern. All infrastructure projects are capital intensive and require upfront investments, unlike a telecom project, which can be rolled out in stages with limited capital and be upgraded over a period of time. Moreover, the returns do not translate into immediate revenues, unlike in the case of a telecom project, where revenues are realised as soon as network utilisation starts.

For private players to invest in road projects, effective revenue models must be defined that are directly linked to the project, like setting up toll tax under BOOT (Build, Own, Operate, Transfer). Banks can play a big role by offering loans for infrastructure-related projects at subsidised rates or can directly invest in the project.

With coal usage detrimental to the environment, incentives can be given for companies to opt for alternative and eco-friendly fuel/raw material for power generation, like wind and solar energy.

India receives solar energy equiva lent to over 5,000 trillion kWh/year, which is far more than the total energy consumption of the country. More than 700,000 PV (Photovoltaic) systems generating 44 MW have been installed all over India. India now ranks as a ‘wind superpower’ with an installed wind-power capacity of 1,167 MW. About 5 billion units of electricity have been fed to the national grid so far.

Telecom’s pre-paid subscriber mod el can be replicated in the power sector, which would ensure cash for the SEBs. In the same way that telecom operators have insurance against defaulting subscribers, a similar provision could be made to safeguard the power sector. With increased volumes, operators have been able to offer talktime at very low rates. With minimised pilferage and an assured flow of revenue, the government can provide electricity at cheaper rates. The extra revenue can be used to subsidise power for the weaker sections and service remote areas.

Fundamental differences do exist between the sectors but need not pose a problem in drafting policy. The raw material for telecom is spectrum which is available everywhere. But the raw material for roads viz coal, tar, concrete is available in specific regions. Even in the power sector, 61 per cent of the installed generating capacity (110,000 MW) is coal-based. It is essential to mobilise these raw materials efficiently and effectively.

Simply aping the telecom scenario will not suffice. Policies must ensure a conducive environment that will encourage private sector companies and foreign countries to invest in infrastructure projects in India.

(The writer is President, Alcatel South Asia)

First Published: Feb 23, 2006 12:40 IST