THE RIGHT KIND OF POWER
A.K. BHATTACHARYA, RAISINA HILL
The CERC was
upset because its views on the tariff policy issue were not heard, although the
ministry was bound by law to seek the regulator’s statutory advice on the issue.
It was in April
2002 that the government decided to appoint RV Shahi power secretary. At that
time, Shahi was securely placed in Mumbai as the chairman and managing director
of private-sector or power major BSES. The man who persuaded Shahi to take up
the new assignment was Suresh Prabhakar Prabhu, who was then the power minister.
Prabhu had his own
logic. A K Basu, an IAS officer, was due to retire as power secretary on March
31, 2002. Basu’s appointment as the Chairman of the Central Electricity
Regulatory Commission (CERC), the apex power sector regulator, had also been
approved. Prabhu saw in this an opportunity to have a private-sector
professional as the power secretary, who could speed up the implementation of
reforms on the government’s agenda.
Today, however,
Shahi may well regret his decision and the government may also wonder if getting
a private sector professional to head the bureaucracy in the power ministry was
wise. Power sector reforms are mired in an avoidable controversy. The top
management of the country’s largest power generating company, National Thermal
Power Corporation (NTPC), has lost its trust in the power ministry. And the
CERC’s relationship with the ministry is now strained.
The problems began
with the contentious issue of framing a tariff policy for the regulator. Just
before Basu left office, he had drafted a three-page note on the government’s
tariff policy. But the new dispensation in the power ministry (Prabhu also left
the ministry in August 2002) ignore that note and prepared a new 21-page draft.
The friction
between CERC and the power ministry started that day. The regulator became
apprehensive of the power ministry, which it felt was using the tariff policy to
dilute his role and autonomy guaranteed under the law. In any case, it raised
other objections to the manner in which the 21-page draft tariff policy
attempted to fix new norms of returns and depreciation rates.
The controversy
reached a point where the power ministry decided to disown the draft, claiming
that it had been prepared by Crisil and did not reflect the ministry’s views.
The Prime
Minister’s Office also stepped in and decided, in August 2003, to constitute a
committee to advise the government on power sector investments and reforms. The
committee, headed by Planing Commission Member N K Singh, completed its task
early this month. And soon after, the power ministry decided to take the
recommendations on the electricity policy and the tariff policy to the Cabinet
for its approval. The CERC was upset because its views on the tariff policy
issue were not heard, although the ministry was bound by law to seek the
regulator’s statutory advice on the issue. But the ministry went ahead and
prepared a not for the Cabinet’s approval.
Even within the
ministry, many bureaucrats were surprised by the speed with which the N K Singh
committee’s recommendations were processed. Normally, a committee’s
recommendations are discussed threadbare within the ministry and the views of
all important stake holders are sought. None of those formalities were honored.
Instead, Shahi
seemed to be more keen to get the political establishment to clear the
proposals. A meeting between power minister Anant Geete and the Prime Minister
Atal Bihari Vajpayee was held where Geete apparently got the latter’s
endorsement of the Singh committee recommendations. The ministry also tried to
bring round Planning Commission Deputy Chairman, K.C. Pant to agree to the
changes. Eventually, all this did not yield the desired outcome because the
cabinet failed to take up the proposal at its last meeting.
What upset the NTPCs top management was the N K Singh committee’s
recommendation that the state-owed company should be split into five independent
generating companies. The committee had Shahi as one of its members. The NTPC
management, which was a already aggrieved the manner in which the government was
trying to influence its decisions on the award of some contracts, felt that even
the power secretary had endorsed a proposal that suggested its restructuring and
consequent emasculation.
(Courtesy: Business
Standard:24.2.04)
