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Voice of Electricity Workers Letter from Suresh P. Prabhu, Minister of Power India, New Delhi-110 001. D.O.No.2148/2000-P&P 10-01-2001 Dear Friend, After taking over as Minister of Power in October, 2000, I have spent the last few months trying to analyse the problems of this sector and working out strategies on how to overcome them. Needless to say, the Power sector in India is in dire straits and needs immediate attention in order to avoid a total crisis, which is growing by the day, has reached unprecedented levels and only a well thought out and pragmatic approach can help us from total darkness in future. As you are all aware , India has always been short of power and our entire populace, including the industrial sector has faced power cuts adversely affecting our welfare and national productivity. Our per capita consumption of power is a meager 348 units compared to about 750 units in case of China. The supply side constraints in the power sector have arrested our economic growth and crippled our industry to an extent where recovery in future would be cumbersome process. Serious doubts have been raised whether the power sector will be able to support a national plan of achieving an eight to nine percent rate of growth for the economy. We have reached a stage where the State Electricity Boards (SEBs) are depleted of resources and are in no position to pay for the power they buy from the generating stations. The total outstanding dues of the SEBs have crossed Rs.27,000 crore. This, in turn, has affected the liquidity of the Central Public Sector Undertakings (CPSUs) for investment purpose for future projects. The problems of the power sector are many. While the liquidity crunch is one major problem, we also have other issues to tackle like unacceptably high levels of transmission and distribution losses, an inadequate transmission and distribution system, lack of adequate metering, drop in the tempo of rural electrification, fast rate of obsolescence of existing generating capacity, declining share of hydro-thermal mix. Etc,. No doubt some of these issues are inter-related and , therefore, what we need is a multi-prolonged strategy. The core solution to my mind is power sector reforms. When I speak of reforms, what I have in mind is a healthy relationship between generation, transmission and distribution, which can sustain each other on commercial principles. The distribution should be able to generate revenues so that the generators reap adequate rate of return on their investments to set up more and more capacity to keep pace with the growing demand of the economy. It has estimated that in order to meet full demand for power by 2012 we need to add about 1,00,000 MW of additional generating capacity. This would remain only a dream unless we find the resources to implement this plan. In the present context, the utilities are hardly in a position to make investments considering the fact that all of them have negative rates of return. The basic ethos that we need to pay for the power we consume has to be instilled amongst all, be it industrialists, agriculturalists or even domestic consumers. We can, of course, think of building some kind of social net for the under-privileged sections of society but it cannot be at the cost of the generator or distributor. Subsidies can certainly be paid by the Government to protect the poor but it must be provided in the budget and money paid to the SEB from the budgetary support. The Government, realizing the need for reforms has been working on the policy prescriptions since the mid 1990s. The Government formulated the Common Minimum National Action Plan for Power (CMNAPP) in 1966 which was followed up with the Central Electricity Regulatory Commission in 1998. The Commission, as you know, is an independent body which would, inter-alia, be responsible for fixation of tariffs so that the utilities are able to earn an adequate rate of return on their investments. The Central Government has played a pro-active role in convincing the States on the need for reforms and I am happy to inform you that fourteen States have already set up their own State Electricity Regulatory Commissions (SERCs). While this is only the starting point, we would now need to consolidate our efforts and ensure that all the remaining States also follow suit. With this in mind, I propose to bring out a total comprehensive framework for reforms before the nation. The proposed Bill in this regard would make reforms mandatory for the States but give them the flexibility of adopting the approach/model which would suit them best, I am confident that each person, irrespective of which political ideology he/she subscribes to, would support this initiative. I am very clear in my mind that this is our last opportunity to make amends insofar as the power sector is concerned. I must, however, caution that the passage of this Bill is not an end in itself. We have to ensure that institutions, which would be set up subsequently function in the manner, as envisaged. I would expect a successful reforms movement to work as a panacea for the major ills of the power sector. If we are able to introduce this properly, we would be able to solve the liquidity crunch of the utilities by lowering our transmission and distribution losses and thereby solve related problems like doing away with a regime of cross subsidy which strikes at the roots of our industrial competitiveness. The other issues which would still need our attention would be how to reduce the cost of power generation and make it comparable with that of other countries, improve our hydro-thermal mix, introduce an element of transparency in our bidding process, electrify the remaining villages and other remote areas of the country etc,. On the issue os how to reduce the cost of power, I have set up an Inter-Ministerial Committee which was looking into the issue. I expect the committee to advise me on the steps we need to undertake to lower our cost of generation. I also plan to introduce complete transparency in our bidding process and a modest beginning has been made by creating an icon for bidding in our website where information relating to bidding/tenders has been posted. Our aim is to expand the domain of this and ultimately create a separate website totally devoted to tenders and biddings in the power sector. Finally, a word on rural electrification. Unfortunately, the pace of rural electrification has suffered a set back in the past few years and this has adversely affected our plans to electrify all our villages. In the present circumstances, the SEBs find rural electrification an unviable proposition. We have to find ways to reverse this trend and examine what best we can do to complete this task. Perhaps, the solution lies in creating stand-alone systems utilitzing non-conventional energy resources. The purpose of this letter is to apprise you of the situation we are in as far as the power sector is concerned. It was my intention to bring to your notice some of the major maladies which lie before us and to seek your opinion and advice in the matter. I am sure with your experience, you would be able to provide useful inputs to us, which can be incorporated in our future policies. We would, of course, have to deal with the problem subsequently and to make a beginning, reforms should be the first priority for reasons I have already indicated earlier in this letter, I hope to receive your whole-hearted support towards this initiative of ours. I will be grateful if you could kindly give us your views in the matter. With regards, Yours sincerely,
Sd/- SURESH P. PRABHU) |
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