Last week in his Independence Day speech, the Prime Minister announced the intention of the government to replace the Planning Commission. Furthermore, he has asked people to give their suggestions on the next steps in replacing the Commission with another suitable institution. Read more »
I suppose each one of us has a favourite Independence Day recollection. Yet, funnily enough, my defining Independence-day moment did not happen on the fifteenth of August.
Eight blogs back, I tossed a coin to decide whether I should write a layperson’s introduction to the power sector or the garbage problem. A coin’s toss favoured the power sector. I hoped that the problem of garbage in my city, Bangalore, would go away, but it has gotten worse. So here goes; let me tell you my garbage story too. Read more »
So far, the story that I have related in this series of blogs is one of half-hearted reforms. Each of the adventures embarked upon so far - unbundling, privatization and the promotion of energy markets - has not eased the travails of the consumer. It is easy to say that the inability to bite the bullet on power tariffs, and in particular, the fear of charging farmers for the power they consume, has been the bane of the power sector. However, on a closer look, power subsidies to farmers are like any other policy of subsidizing them. It is possible to provide – though it might be difficult to sell the idea to them – a complete basket of subsidies in the form of cash transfers, and then withdraw service wise subsidies, such as in power, or irrigation, or fertilizer.
From the late nineties onwards, States began to use the concurrent powers bestowed to them under the Constitution to deal with the power sector, to enact laws for power sector reforms. These amendments freed up generation for the private sector, unbundled the monolithic electricity boards into separate entities for power generation, transmission and distribution and constituted electricity Regulatory Commissions, which would set tariffs and standards for generation and distribution. Read more »
Even as privatization of the generation sector was happening, another idea gained currency as a frontline strategy of reform; unbundling of the power sector. At first sight, the idea seemed reasonable enough. By the late nineties, State Electricity Boards had become unwieldy, leviathan organisations. Those of larger States, such as Uttar Pradesh, were Railway-like in their sizes; They had the largest numbers of employees compared to other public sector undertakings on their rolls, ranging from specialist engineers who ran generation plants to legions of linemen and bill collectors, who were the frontline workers that consumers usually saw (or did not see).
By the late nineties, about five years after liberalization, it was clear that the travails in the electricity sector were pegging the country back. That was when the Government of India got into the act.Privatisation was the flavour of the season and the Government of India was not immune from the belief, peddled by a flotilla of foreign consultants and international aid and lending agencies, that bringing in private capital into the electricity sector would boost generation of power.However, there was a problem here; why would anybody invest any money in the sector if the power tariffs were such that nobody could make a legitimate profit? To cure that, the government of India issued an order in 1996, which to my mind would rank as one of the biggest policy blunders of the government. The order permitted the entry of the private players into the power sector, on a declaration that a return of 16 percent would be assured on private investment. The rationale for this order was that other countries including our neighbour, Pakistan were doing it with good results. Read more »
There is no doubt that the electricity sector is in a shambles. How we got where we are, reads like a Greek tragedy; no one individual or level of government is completely responsible and yet collectively, we have managed to mess up things magnificently.
Last week’s blog evoked plenty of reaction. Obviously, discussions on the power sector touched a responsive chord. Read more »
I ended last week’s blog with the observation that production of electrical power nearly always involves some form of rotary motion. At first sight, one might wonder whether this is a blog on public finance, or is to assist 8th Standard students in understanding the basics of electricity. Read more »