For a power market

The new power minister needs to understand the levers available and use these to make sure that a free market develops for power

Whoever is appointed the new power minister will have his/her work cut out. Power shortages continue to rise, as do losses in the sector; and, with each passing year, the slippages are getting worse. In the last three five-year Plans, for instance, the country achieved just 50-60 per cent of targets for setting up fresh power capacity; it hasn’t got any better in the current Plan, now into its third year. Among the many issues that need to be addressed (among them coal linkages, gas supplies, and plain project execution skills), one is the fact that the regulatory system put in place through the Electricity Act of 2003 is just not working. As in telecom, the regulatory system was to insulate the sector from political interference; one vital plank of this reform was what is called “open access”. This would allow consumers in any part of the country to buy power from any electricity supplier in any part of the country, for a reasonable charge—in other words, competition would force utilities to get competitive. By this year, any consumer with over 1 Mw of consumption (which is what an average shopping mall uses) was supposed to get “open access”. And yet, there has not been even one case so far of “open access” for the larger consumers.

 

If consumers are to be free to buy from suppliers in various parts of the country, then suppliers have to be free to supply as well. Indeed, the Act envisaged that, given the huge shortages, this “open access” would encourage firms to set up fresh capacity and thereby end the power shortage once for all. Yet, as this newspaper has reported, states like Karnataka, Tamil Nadu, Andhra Pradesh and Orissa have been using an emergency provision, which was to be used only in “extraordinary circumstances”, to force suppliers to sell electricity only within the state. There is also a petition before the central electricity regulator pointing out that several state-level load dispatch centres deny permission to take power outside the state by arguing that they do not have enough transmission line capacity.

On the face of things, there is little that the ministry of power in New Delhi can do to address this problem, since power is a concurrent subject. But in fact there is a great deal that can be done. For one, the central government gives hundreds of crores in assistance to states for fixing their power sector—one of the various conditions attached can surely be the number of “open access” permissions given. Asking for the demand-supply position of the state-level regional load dispatch centres (which govern the movement of power on state-owned transmission lines) to be made public on a 24x7 basis, similarly, should not be difficult to enforce. The power ministry, similarly, controls the output of centrally-owned power utilities and, as part of this exercise, also controls a certain excess supply which is then allocated to states; a part of this can be earmarked for power trading. This will have the additional benefit of ensuring that the prices at which power is traded do not reach astronomical levels. In other words, the power minister needs to understand the levers available and use these to make sure that a free market develops for power; once there are enough buyers and sellers, investment should be more willing to come in and make up the capacity shortfall.