Ourview | A reform idea gone awry

Ourview | A reform idea gone awry

The power sector, unlike other sectors, defies easy reform options. The Union government can, at best, advise the states on how to reform their ailing electricity supply businesses with sweeteners such as inexpensive power supply or cheap funds to improve the infrastructure. But it cannot force them to act.

The “incentive-based" efforts have fared poorly over the last decade. Several reasons are at work here—the lack of a credible base data and the absence of sincere efforts to monitor and guide reforms being two important ones.

Against this backdrop, the Union power ministry suggested that such consumers mandatorily seek alternative supplies and the utility could negotiate rates outside the regulatory sphere so long as the subsidy surcharge is factored in. This means that utilities can charge spot or short-term market prices and stay outside the purview of the regulator for this segment.

This whiff of deregulation is misplaced, and the effect is there to be seen. Recently, distribution utilities in Rajasthan told industrial consumers that they ought to fend for themselves, and that there is no more any obligation to serve them. On the other side, West Bengal has argued that there is no way that it can let go such consumers who bear the subsidy.

The problem is that the power ministry has tackled the open access issue from the wrong end. The issue is one of governance. Since consumers depend on the state-owned transmission highway to access electricity from outside, it is very easy for the utility to bully companies with threats of blackouts. This also creates room for corruption.

Open access in itself is a poor solution—it virtually eliminates the possibility of private participation in the distribution business at a later time. There ought to be better solutions.

Why are state governments resisting power reforms? Tell us at views@livemint.com

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