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VOICE OF ELECTRICITY WORKERS
Editorial
Power
liberalisation prescriptions failing, but continued to be imposed
Put
off Liberal logic - BS MEEL
The driving force of any
economic and social development, the energy is the object of all the desire. By
all its means powermen (National Coordination committee of Electricity Employees
and Engineers) works at highlighting the social dimension of the energy in the
service of the people which meets the needs of our sectors and of users. The
electricity is thus in the heart of the stakes which concern all the people.
Launched at the time of Thatcher, the Privatisation and neoliberal policies
always wrought devastation. The historic bankruptcies of Enron and the
Californian electric system are the eloquent demonstration. These bankruptcies
must not be treated because their scale is immense and of an incredible level
until now: 64 billion dollars of losses of Enron, 75 billions for the
Californian energy sector the compensation of which is completely chargeable to
the population.
The recapitalization of British Energy by the state demonstrates well that
profits go to the private and losses to the nation.
We rediscover that markets can be manipulated. We already knew it before even
the big crisis of 1929, but the collapse of the Californian electric system is
even more sensational proof. By deregulating the sector, the Californian
authorities allowed the implementation of oligopolies at the level of the
production which knew how to perfectly and quickly organize the electric
shortage to make and rocket the prices. The prices, which, if they beat records
in California (changing from 30 dollars per MW in 1300 dollars in May,2001)
generally increased all around the world after these
deregulation-privatizations, disastrously leading to repeated tariff shocks to
the consumers and increasing power shortages.
These also end in real disaster for the employment and a marginalization of the
role of the employees. The sector of the energy in Europe is particularly aimed.
So we foresee the lost of 2,50,000 jobs because of the deregulation in the next
years. This is added to 2,12,000 jobs already lost in the only electric sector
from 1990 till 1998. Another example: when EDF acquired the Brazilian
electrician lights in 1999, this one counted 13,500 employees. There remains
3500 to-day. When we count Delhi distribution Privatisation it counted 6200 out
of total 11,500 distribution employees under VRS moving from pillar to post for
terminal benefits. Orissa similarly also worst causality. The working conditions
also suffer from privatization, as suffer from it the trade union rights.
Ten years after the opening in the competition and the Privatisation in the
concerned countries, the electric shortage becomes the standard. Italy for
example can be in Californian situation without external supply of the current.
The recent general cut testifies of this deficit and its consequences.
Indian Electricity supply is erratic and of poor quality and to top it all,
nearly three-fourths of poor households specially in rural areas have no access
to electricity. The safety and security of supply are incompatible with the
appetites of maximum profitability. The criteria of management of the private
electric sector directed essentially to the reduction of the costs of human
work, question of safety and the security and the employees role.
INTERNATIONAL SITUATION IN YEAR 2005
In a recent paper in March 2005 “ A survey of Empirical Evidence on Determinants
and Performance” by researchers of Cambridge University, U.K. have provided a
survey of electricity reform in developing countries, the authors say that given
how much time, money and effort has gone into reforming infrastructure
industries in developing countries, it makes sense to “examine whether the
evidence supports the logic of reforms” So they have reviewed evidence on
electricity reforms in developing countries and raised a red flag.
They conclude that “until we know more, implementation of reforms will be more
based on ideology and economic theory rather than solid economic evidence”.
Electricity reform for them remains “work in progress”.
Competition policy debate continues: To combat growing concern among customer
groups and others that wholesale electricity competition is not creating value
for customers, seven energy companies, including four utilities, are creating a
Washington-based coalition to lobby and educate consumers and policy makers.
The formation comes after several customer groups and one ideologically
pro-market think tank in recent months have questioned the benefits of
competitive electricity markets.
The American Public Power Association, Electricity Consumers Resource Council,
the PJM Industrial Customer Coalition and the Cato Institute since November have
all found significant faults with electricity markets operated by regional
transmission organisations and promoted by FERC. And more recently, officials
with the National Rural Electric Cooperative Association. Have echoed these
concerns.
On 15th December 2004, the Indonesian constitutional court cancelled the
government’s law package to unbundle and privatize the country’s electricity
system. The Judges referred to international experience with Privatisation in
rejecting the law, which they said would harm the country.
INDIAN POWER SECTOR REFORMS:
Driven by ideology, economic reasoning, and early success stories, vast amounts
of financial resources and efforts have been spent on reforming infrastructure
industries in developing countries. Power reforms in India started in 1991 with
the liberalization of generation, but many IIPs subsequently withdrew. The focus
of power sector reforms has since shifted to distribution. Many states are
pursuing reform programmes with the central government holding out incentives
for them to stay the course of reform. These reforms are the handiwork of a
small group of bureaucrats and consultants with no inputs from professional and
engineers. The reforms have been finalized in totally non-transparent manner and
without the basic ingredient of any democratic public participation. The driving
force for the reforms is not a conviction among the states that the reforms are
imperative rather it is allurement to large financial assistance, which is
goading the states to reluctantly show just enough progress to qualify for the
release of next installment of aid. The fiscal distress that most states are in
compels them to give priority to power reforms in particular as this sector is
where most of the states financial hemorrhaging occurs.
THE HARD BUDGET CONSTRAINT IMPOSED BY TRIPARTITE AGREEMENT HAS CONTRIBUTED TO
CREATING THE POLITICAL WILL IN THE STATES TO ATTEMPT THE HARD TASK OF ACTUAL
DISTRIBUTION REFORMS.
The standing committee on Energy – Ministry of Power – Fourteenth Lok Sabha –
Demand for Grants (2204-05 – Third Report – page 16 states:
“The committee is not satisfied with the progress made so far in the States,
particularly in regarding the un-bundling of the state Electricity Boards,
feeder metering and consumer metering. The committee understand that the states
have to complete these reforms on priority basis for getting loans and grants
under APDRP. The committee also wants to remind that for the successful
implementation of the Electricity Act: 2003, to bring commercial viability in
power sector for achieving the national targets in power sector, these schemes
are to be completed urgently. The committee are not satisfied with the present
status of these schemes in the states. The Committee, therefore desire that the
Central government should ensure a speedy implementation of these schemes in
States through their active participation and inform the committee about the
elaborate steps taken by them and the outcome thereof”.
The governing class is now trapped: Fiscal necessity demands that subsidies be
reduced/eliminated but undoing them could prove politically harmful. Farm
leaders have managed to block any agriculture tariff hike in AP, Karnataka,
Rajasthan, Gujarat, Maharashtra and Tamil Nadu. Karnataka for example did not
implement the commission’s tariff hike order in 2002. Rajasthan did not allow
the utilities to file for tariff hike even after 4 years of unbundling except in
2005 whose implementation has also been deffered. Andhra Pradesh has not sought
any increase for Agricultural consumers in last tree tariff fillings.
The contradiction needs to be analyzed objectively. Power sector policy thus
forms a core component of a political strategy “concretizing the difficulty in
depoliticalising power sector”.
The Government of India had notified the national electricity policy on 12th
Feb.’05 the essence of which is “user charges” OR DEPOLITICALISE POWER SECTOR
i.e., one who consumes should pay for it. Mechanically invoking the philosophy
of user charges, is wrong diagnosis of ills of power sector, which will not
improve the balance sheet of power utilities, on the contrary it will push the
peasants back to the wall. The national electricity policy has failed to
identify any specific policy initiatives that would address the key problems in
power sector.
The policy is more like a statement of wishes, how it will happen is not clear.
The policy presumes that there is paying power for electricity in rural areas.
It may be in principle but in practice affordability is simply not there due to
the “cost of supply” approach will result in extremely higher tariff for
domestic and other LT consumers. This cost of supply approach itself will go
against the affordability of power so far as the paying capacity of the poor
people is concerned. The philosophy of cost of supply does not permit the luxury
of providing power infrastructure to remote villages where asset creation will
be come in fructuous due to non-paying capacity of the local people for
electricity. The burden will be further passed on to the same class of consumers
who will be already be burdened with high tariff due to cost of supply.
The aims to increase rural electrification and decrease cross-subsidy are not
compatible.
How an investment of rs.9000 billion required in the sector is a snapshot of the
policy and that too 50% out of it to be mobilized through private sector.
There is no talk of optimum utilization of energy resources in the policy
document and it has failed to identify any specific policy initiatives that
would address the key problem in the sector. The latest shortfall projections 55
million tones of coal by 2006-07, ballooning to 115 MT by 2010-11 despite the
fact that we are sitting on over 91 billion tones of proven reserves. NTPC our
biggest power producer, is seriously considering large scale coal imports for
its plants at pit-heads. A severe and unwarranted coal shortage is upon the
country choking growth and costly coal imports are faced upon. Last week energy
minister has quoted that due 15 million tonne coal shortage 3 BU of electricity
could not be generated in the year 2004-05.
What motivated the National Electricity Policy ? While the Electricity Act: 2003
was more of a vision paper providing an enabling framework, this policy is aimed
at making that vision a reality. The Indian Electricity sector faces a crisis on
many fronts. Unless we take a holistic view of the sector, we are going to see
only the well-off sections receive power and the price rise. Medium class
consumers will have to tighten their belt on consumption instead of policy
presumption of raising per capita consumption to 1000 units to taste
technological developments. It will adversely impact both agriculture and
industry. The GOI is falling rather adamant to the promised review the
Electricity Act, 2003 (Under CMP).
The key areas of dispute are removal of subsidies & cross subsidies, unbundling,
privatization, open access and urban rural divide, State Electricity Regulatory
Commission and captive generation power.
General perception is that present power reform programme is essentially a
‘bankrupt workout’ with no social objective. The dictates of economic efficiency
and profitability will leave little space for articulation of and promotion of
the public interest in the electric sector. The World Bank itself describes
reform as being possible only when it is politically desirable, politically
feasible and credible (WB 1995).
In the meantime, the country suffers from systematic cuts of current of very big
scale which entails grave economic damage in all the branches of industry and
provoke an intolerable situation for the users the power shortages are going to
become standard . All these illustrate of the total failure of the power reforms
in India.
All around the world, we notice the systematic weakening of the electricity
systems due to the policies of deregulation, unbundling and Privatisation. The
World Bank, the Asian Development Bank and the TNCs know their policies are
failing, but they continue to impose them.
As for electricity, it is subjected to the violence of markets as the huge
breakdowns arisen in many countries, for example recent blackouts in leading
reform-countries such as California 2001, Auckland, New Zealand 1998, Chile
1998-99 and within two months of U.S outage of 14th August 2003 (may have been
largest in history), the entire Italian power system went down and there were
big blackouts in London and in Denmark and Southern Sweden. As shown by the case
of California’s electricity crisis, the financial and political costs of flowed
reforms can be unacceptably high. Hence countries interested in reform, as well
as international development and finance organisations, have to evaluate their
options and policies toward the electricity sector.
To-day, the big losers of the energy battles are the most deprived inhabitants
of the poorest countries, which even have no access to the electricity, the
disparities and the injustice aggravate in a dramatic way, putting in danger the
world peace. The consequences of implementation of Electricity Act: 2003 will be
denial of rights to electricity for the poor and village dwellers of India.
There are differing views and a degree of theoretical ambiguity in the economic
literature on the effectiveness of Privatisation and competition in network
industries on issues such as the relative efficiency of privately vs. publicly
owned natural monopolies, and gains from competition vs. economies of
co-ordination in vertically integrated systems. In practice, the benefits of
each reform and restructuring must more than to compensate for the increase in
transaction costs of unbundling vertically integrated systems.
Reformers have found the reform path considerably more complex than anticipated,
because electricity markets are characterized by the need for real time
balancing of supply and demand (due to a lack of storage) and hence different
than most other deregulated sectors. It is also clear that reformers
underestimated the political difficulty in moving tariffs to cost-recovering
levels.
In principle, a reform should be undertaken if it will have a positive welfare
economic impact. However, governments do not necessarily perform social
cost-benefit analysis prior to reform and instead they tend to rely on less
formal types of assessment.
The results of the Privatisation in the world are overwhelming. It is this
impossible to justify them. To cover in an effective way, the energy needs in
respect for the populations is a major question for the economic and social
development. Progress and energy always keep pace.
The electricity policy has to get free of speculative logic. It is a central
question in the heart of the strategy of sustainable development that concerns
us all. This energy policy must allow meeting the needs, protecting the
environment, reducing disparities between the regions/states. To do it has to
remain under public control with strong social guarantees, condition of a
democratic control of the energy.
The energy workers have to have a high-level status, guarantying rights,
salaries, working conditions and high level social agreements. It is thus
necessary to create a necessary power struggle, the fight is our only way. All
around the world, where employees fight for their rights and their future, they
succeed in negotiating and even making put-off the liberal logic. The trade
union fight is thus paying.
The National Coordination Committee of Electricity Employees and Engineers
planned the various forms of actions: local demonstrations, conventions and
rallies in state capitals, general assemblies of staff, march before parliament,
delegation to state governments and managements as well as to central government
including memorandum to the Prime Minister of India but in vain. The government
of India forced the electricity employees and engineers to the path of strike.
The electricity employees and engineers of India, find no other alternative than
to resort two days strike in electricity on 31st May and 1st June 2005. The
fight is a serious fight as it involves a policy change.
The only effective way to resist this foreign pressure of liberalizing is to
mobilize the citizens in the defence of our public services. Our unions are to
work together with people to resist the Privatisation.
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Extracts from Electricity Sector Reform in Developing Countries
Development research group of the World Bank :
http://econ.worldbank.org |
