When the National Democratic Alliance (NDA) government at the end of its first term instructed all the ministries to prepare a 100-day action plan, as part of the exercise, the Union power ministry was said to be toying with the idea of a “power sector council" to address issues between the central and state governments. The proposed power council would be headed by the Union power minister and would have the Union finance minister and power ministers of all states as members. Additionally, it would be assisted by a standing committee headed by the Union power secretary, with finance secretaries, principal secretaries (energy) and principal secretaries (finance) of all states as its members.
But what is the need such a council? What can it achieve?
Electricity being in the concurrent list, there are a number of issues between the Centre and states, which require reaching a consensus. Ensuring reliable and continuous supply of electricity, curbing the tendency of discoms to shed load and penalizing them for unwarranted load-shedding, direct benefit transfer, capping cross-subsidy charges, honouring power purchase agreements, etc., are issues where consensus is needed.
An important issue, which has been hanging fire for some years, is the amendment to the Electricity Act, 2003. This requires consensus between the Centre and the states. Some of the amendments, such as on tariffs, could affect the sector vitally and bring the much needed financial turnaround of the discoms. There are contentious issues, such as the separation of carriage and content, which were proposed in these amendments. A council would provide a platform to discuss these issues.
The weakest and most critical link in the power chain is distribution, which is in the hands of the state governments. Let us look at two problems that the distribution segment has faced for years. One is the poor financial condition of distribution companies (discoms). Lack of finances and political will are the basic reasons for this continuing to remain so. The lack of finances was addressed by the central government by taking care of the outstanding loans of the discoms. But lack of political will prevented any serious effort in ensuring that the discoms did not bleed operationally.
The second is the issue of India’s struggle to connect all villages and households, and supply them with electricity. The reason again is lack of political will and finances. The issue began to see resolution only when the government of India provided massive finances with a 90% subsidy under the erstwhile Rajiv Gandhi Grameen Vidyutikaran Yojana.
The conclusion one would draw is that it is all fine to build consensus. But the states will get down to getting the job done only when finances are taken care of by the Centre. Even consensus becomes easier when finances are forthcoming.
To ensure that the power council is effective, it will have to be given the competence to commit funds to the states.
But how will the political will, to take what may be seen as unpopular decisions, be forged through this council? The first issue mentioned earlier is a case in point. Raising tariffs has been something many state governments have been avoiding. That tariffs should be raised is not lost on the people concerned. Will they agree to come round to doing so because of the council? Or, will there have to be some sticks to be applied to get them around? Will the stakeholders agree to sticks also?
P. Umashankar is a retired 1976 batch IAS officer of the Uttar Pradesh cadre. He is former power secretary and also the chairman and managing director of state-owned Rural Electrification Corp. Ltd.