The past five years have been significant for the Indian energy sector. It has witnessed the evolution of competitive markets and initiation of large capacity-addition programmes in power generation, including the flagship ultra mega power projects (UMPPs), each with a capacity of 4,000MW or more.
The bid-based processes have brought about an altogether different level of speed and transparency. The results have not been uniform, though.
Power transmission and distribution have not made much progress. Recent developments in the distribution sector have been disappointing, with commercial and financial losses mounting.
However, on the whole, the scorecard of the energy segment in the country doesn’t look all that bad.
The same is the case with the oil and gas sector with the relative success of the New Exploration and Licensing Policy rounds and the notification of the Petroleum and Natural Gas Regulatory Board, or PNGRB.
For all its imperfections, PNGRB has been pushing new regulations and authorization processes that have set the gas industry moving.
The common man stands to gain substantially from the expansion of city gas networks through the provision of piped natural gas for households and compressed natural gas for vehicles. The first round of bidding for city gas distribution is under way and further rounds for more cities are to follow.
The issue is not whether progress has been made; indeed, in many spheres the progress has been much faster and more substantial than before. The point is about how much credit the United Progressive Alliance, or UPA, government can claim for the developments in the energy sector.
In fact, much of the progress made has been on the back of milestones reached before the UPA took over in 2004.
The Electricity Act, 2003, which set into motion the rapid development of power markets, predates the UPA regime. Much of the action that followed, such as the National Electricity Policy, were also initiated prior to the UPA taking over.
There is little original the government has to show for all the time it has been in the saddle. The Accelerated Power Development and Reforms Programme initiatives in the distribution sector have been flagging. While there is a logical focus on issues such as information technology implementation, the core technical and business aspects in electricity distribution have been severely neglected.
Financial losses of the power sector are in the vicinity of Rs30,000 crore per year and subsidy bills have been mounting. Indeed, there is a palpable lack of direction in the efforts of the government on such critical issues.
A similar lack of dimension is visible on the fuels front. Project development is seriously affected by the lack of coal.
Till about two years ago, the quest of developers was for coal mines. Since then, even coal linkages—assured coal supplies for power projects—have become a prized and expensive commodity. A contemporary policy on coal mining, utilization and marketing would have been a useful legacy for the UPA to leave behind. Unfortunately, even with the Prime Minister at the helm, the ministry of coal has failed to deliver.
On the gas front, multiple flip-flops on gas utilization policy, pricing of gas and evolution of competition has characterized the functioning of the government. All hopes of transparency and competition in motor fuels have come to nought. Administered prices have become more institutionalized than ever.
A shining exception to this otherwise pedestrian performance of the UPA has been the Indo-US civil nuclear deal.
The determination and sagacity with which the agreement was shepherded by the Prime Minister was admirable. This one achievement redeemed the image of the UPA to a great extent. Even this was started by the previous National Democratic Alliance regime, which unfortunately surrendered the initiative for the sake of opportunistic politics.
However, the final winner in this episode was clearly the UPA.
It is usual to judge a political regime by what happens during its tenure, and not by what it is truly responsible for. As far as the energy sector is concerned, the UPA has been rather lucky in this regard. Perhaps the greatest credit to the government is that it let initiatives of the earlier governments continue and, in effect, reaped the benefits of what had already been sown.
The author is CEO at Mercados Asia, an energy consulting firm.
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