Ourview | Full circle in power sector

Ourview | Full circle in power sector

In the early 1990s, the government bet on private sector participation to solve the country’s power crisis. Attractive policies offered generous returns, besides fast-track approvals. There was an element of grabbing as well. Project sites marked for public sector participation found their way into the private menu. It is not as if the public sector would have set them all up, they were short of money, one of the reasons that private capital was wooed in the first place. However, the new Brahmins failed too. And, the fortunes of the public sector improved.

This was marked by two powerful events towards the end of the decade. First, the Dabhol crisis, where the price of electricity produced by the beleaguered Enron Corp.-promoted Dabhol Power Co. (DPC) was injurious enough to take down the state utility. On a more constructive note, there was another milestone. The Union government brokered a one-time settlement (OTS) for public sector power generation companies with utilities on past dues that had ballooned over the years. The public sector raised its head again while private power earned a bad name. More importantly, the OTS released money for the country’s largest power company NTPC Ltd to set up power projects.

This story came full circle early this year when private companies led by the Association of Private Producers complained to the Central Electricity Regulatory Commission and alleged that NTPC had used its dominance in the market and cornered a large volume of business. The regulator is now framing rules to prevent anti-competitive practices.

The association alleged that NTPC rushed and signed up deals with state distribution utilities for 48,000 megawatts. All this before January 2011, after which it could enter into negotiated deals; NTPC will have to compete along with private companies to secure power sale deals.

The question is: why do consumers (read utilities) prefer negotiated deals where competition could throw up a lower tariff? After all, it is difficult to believe?that?the?states were coerced into signing a deal with NTPC. The answer lies in the association’s very allegation. Only that, one has to rewind back a decade. Then, private companies cornered the power deals. But few power plants came up. NTPC’s record is a lot better. And, not too expensive either. No doubt, this is due to some level of state support in different manners—preferential coal mine allotments, easier funding, to name a few.

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