Transform, or perish
To solve the power crisis, free up pricing, set up a regulator and make the sector viable.india Updated: Jan 19, 2012 23:18 IST
Private producers that have set up a quarter of India's power capacity had a fruitful day in New Delhi on Wednesday. They got Prime Minister Manmohan Singh to set up a troubleshooting committee headed by his principal secretary Pulok Chatterji to work through the issues that have been bedeviling electricity generation of late. A committee of secretaries has 90 days to fix a host of problems ranging from coal and gas shortages to environmental clearances to the price at which power is sold in the country. The coal and petroleum ministries have promised to raise their respective allocations to the power sector while the environment ministry will work on easing mining clearances. Sensitising so many arms of the government on the impending crisis India's power generators are facing - half the country's thermal plants have less than a week's coal supplies - is an achievement in itself. If Mr Chatterji's committee can come up with a plan to avoid this scenario from recurring, the government could take credit for healing a festering sore in the economy.
India is slow to set up new power capacity principally because it is short of fossil fuels. Coal is mined hesitantly and natural gas, the other feedstock for power plants, is just beginning to flow in from new offshore finds. The government rations both. The immediate response to a power sector in distress is to give it a bigger slice of the pie. The sustainable response will need the pie to grow overall. India's basic energy shortage is compounded by the policy of selling electricity to consumers at politically correct prices. The government-owned distribution monopolies in the states have all but lost their ability to buy power because their political bosses force them to sell it cheap, sometimes free, to voters. This opportunism is hurting the economy: India's peak power deficit over the past decade has never dropped below 10%. The government estimates unaccounted for sale of power in India, at a third of the total, costs the country 1% of its gross domestic product.
The road ahead for reforms in India's power sector is well lit. Introduce competition in all three areas of the business - generation, transmission and distribution - to enhance productivity and contain leakages. Create an independent watchdog that can withstand the political pressures playing on different links of the nation's power supply chain. Finally, free up pricing to make Indian consumers more responsible for the electricity they use. This has been the broad course of power sector reforms the world over. With dramatically successful results. India's inglorious record in producing power has had a depressingly familiar ring to it for years. It would be a leap of hope of experience to expect Mr Singh's troubleshooters can in the next 90 days do much more than tide the immediate crisis away.