Light at the end of the tunnel

Despite setbacks and mistakes, reforms have changed the power scene for the better

Parsa Venkateshwar Rao Jr

Jack Welch, the former CEO of General Electric, told a business convention at Bangalore in 2000 that computers cannot run if there is no electricity. He was driving home the importance of the power sector if India is to fulfil its aspirations as a global economic power. It was not that policymakers at home were not aware of the painful inadequacies of the infrastructure. And in his second innings for pushing reforms forward to put the country in the fast lane, Prime Minister Manmohan Singh has made infrastructure the growth mantra. It is recognised now that of the US$ 150 billion or so investment needed in the infrastructure, about US$40 billion was marked for power.

There are two major targets for power sector in the country: to take the total capacity of power to 2,00,000 MW, and to attain the goal of “Power To All by 2012”. The two goals converge. If India is to reach an annual growth rate of 10 per cent in the next few years, power needs of the country have to be taken care.

There are as yet no ready-made answers of how to meet the growing power demands of an economy that is expanding exponentially. In the 1990s, when reforms began, the buzzword of “privatisation” was applied to power sector as well. After more than a decade of reforms, it is now being openly confessed in official policy-making circles that privatisation is not the sole answer to problems of power shortages. There is now a sober re-assessment of what needs to be done.

It was Singh who broke the mould back in the 1990s when he decided to allow private players into the power sector. It did not work the way as well as expected. The bankrupt American energy major Enron made gave a bad name to privatisation through the ill-managed Dabhol power project. Enron was sucked into the black hole of bankruptcy, and the Dabhol Power Corporation was debt-ridden. That mess has been partially sorted out through a complex debt-restructuring package.

Policy-makers are now talking in terms of public-private partnership (PPP), the new buzzword of this decade. And unlike in the 1990s when it was felt that foreign companies would do the magic trick, it is the Indian private companies who are being wooed into the private sector. The response has been encouraging though it will be some years before the results, or ‘outcomes’ – part of the new lingo that is now in vogue – can be seen.

And there has been significant progress in reforming the government-run utilities, both at the central and state levels. To start with, the State Electricity Boards (SEBs) have been asked to exercise “unbundling”. That is, the state utilities have been managing generation, transmission and distribution of power. They have now been made into separate entities.