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Decontrol the power sector

Decontrol the power sector
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First Published: Thu, Aug 12 2010. 12 30 AM IST
Updated: Thu, Aug 12 2010. 03 00 PM IST
Are we ready for the Commonwealth Games? That’s a question being asked across the media ahead of the sporting event that New Delhi will host in October. The government is pulling out all stops to resolve pending issues—fixing deadlines, dealing with contractors’ payments and tackling associated controversies—to ensure the smooth conduct of CWG.
Given the fixed timeline of the Games, the government is concerned that a crisis is looming. But why not in the power sector? Because it can afford not to supply power to the people and still carry on its day-to-day business. Because we are used to brownouts and blackouts.
Indian industry has found its solution in captive power— even though it costs much more than a utility-scale plant. Often, inefficient machines and expensive fuel are used in these plants. What about the common people? Almost half the people do not have access to electricity, and the ones who have, struggle with the blackouts.
In the past few years, a big problem hindering the development of the power sector have been cited as land, fuel, environment and forest clearances. To a certain extent, industry has been able to get right of way on these issues. Now, the industry is willing to treat land as a market commodity and no longer as an area where the government could (or should) use its eminent domain right and acquire it from the owners at much below market price.
Similarly, on fuel, as industry is getting to understand the time and effort involved in the development of captive coal mines and the likely shortage of domestic coal, the focus is shifting to international coal assets that can continue to feed the upcoming power plants. Many Indian companies have put money in coal assets abroad.
On environmental and forest clearances, both the government and industry are trying to strike a fine balance between sustainability and development. The past one year has been a year of little progress on coal mine development, mainly because of the forest clearance issue.
Many other projects faced tough times for flouting environmental laws. I think this was one issue where the situation had reached the brink and the time had come to enforce the law. But hopefully, at the cost of this delay, we are making the path clear and transparent for all the plants coming up.
One can surely make out that there is a cost of resolving the bottlenecks with the increased land costs, costlier imported fuel and the cost of better environment management. The consumer needs to eventually pay for it. The government needs to move out of the way, let the regulators work independently, and allow tariffs to reflect the cost of service.
Another important issue is about open access to large consumers, mainly industry. Despite the government policy on providing open access to all consumers by 2009, in most states we are still struggling with stifling government diktats and manipulated transmission constraints.
I think the time is right for the government to remove controls over the power sector and let consumers get quality service. If the experience of telecom and roads is anything to go by, they will be more than willing to pay for this?basic necessity.
Sanjeev Aggarwal was head of business development at AES India, one of the earliest overseas entrants in the Indian power sector, and is currently managing director of Amplus Infrastructure, a power project development firm.
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First Published: Thu, Aug 12 2010. 12 30 AM IST