During his recent trip to the US, Union power minister Sushil Kumar Shinde invited private investments in the power generation business. The invitation offers an uneasy sense of déjà vu.
Two decades ago, soon after the liberalizing wave of 1991, a delegation of power ministry officials went to the US and courted private companies. The result was one that has left bitter memories—the Enron debacle. The realization dawned soon enough; the problem lay with the invitation. It was an incomplete one. For sure the country needed investments in the generation business. It was an urgent requirement, given the steep shortages. But there was a critical attendant requirement —investments in power distribution business. In its absence, the electricity prices proposed by private companies soared as they stiffly priced the risk posed by the buyers, the poorly run state-owned distribution entities that collected bills for a little more than half the power they sold.
For sure the situation two decades later is different, but far from satisfactory. The distribution losses have pared, but the pace of improvement is lagging. The Union government has been funding distribution utilities over the last decade, but the prescription has been poor. Even today, data on distribution losses is not entirely credible. Regulators have been set up to align tariffs, but most suffer from varying degrees of paralysis, pointing to backdoor political prompting.
All this, if anything, contributes to a false sense of comfort that the power minister, too, takes refuge under: he pointed out in a meeting at Chicago that while the current generation capacity is around 180,000MW, new capacity of the order of 80,000MW is under construction.
The question is: Are the utilities geared to ensure payment for this unprecedented gush in electrons over the next few years? Or, are we going to witness defaults in payments of bills to generators? In other words, what should be done to accelerate the pace of distribution reforms?
A key answer lies in privatization. While it is for the states to bite this bullet, the Union government has steered clear of nudging them even though it funds the power sector to the tune of several thousand crores every year.
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