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'Power Distribution Privatisation A Must'

S Ravindran Amit Prasad  |  BSCAL 

Lack of clear and transparent policies has marred the potential of the infrastructure sector. The power and telecom sectors have been the most affected. The fast-track power policy initiated in the early nineties has failed to meet its targets with only two projects, the Dabhol and GVK projects in Andhra Pradesh, seeing the light of the day. The 1,000-mw Hinduja-promoted project in Andhra Pradesh continues to be mired in various problems.

In telecom, after a protracted wrangle, there was a changeover from the licence-free regime to revenue-sharing, feels Vijay Chopra, the Singapore-based director (project finance and structured debt, Asia) of Banque Nationale de Paris (BNP).

BNP has been fairly active in the infrastructure sector. It was involved in the financial closure of the Dabhol Power Project in Maharashtra and the 250-mw lignite-based project at Neyveli in Tamil Nadu. In the telecom sector, it had a role in the Bharti-JT Mobile deal.

India is a focus area for BNP. The Asia-pacific region accounts for 24 per cent of the company's infrastructure funding in the world. Apart from India, BNP has funded infrastructure projects in Singapore, Thailand, Malaysia, Hong Kong and Korea.

What is it the factor that distinguishes India from the rest of the Asian markets?

"In India there is high awareness level about issues. Officials know what has to be done. The will to implement the changes is the problem. The present government is, however, keen and things will move much faster than in the past.

What is your comment on the all-important issue of tariffs in the power sector? Is the global experience any different from that of India?

In Singapore, the residential consumers pay more than industrial consumers. The concept is that the bulk consumers get the maximum funding benefits.

In India the key issue in the power sector is the financial health of the state electricity boards (SEBs).

Many projects are partly funded in foreign currency which is a pass-through. Indonesia found it very difficult to meet this situation in the wake of the south-east Asian currency crisis. Indian SEBs should guard against such a risk and come up with a strategy. They should start hedging in the forex markets.

However, it is difficult to get forward cover for 10 years which is generally the tenure required by SEBs to cover the forex risks.

Do you think the SEBs are getting their act together? What about the reforms in Orissa and the concept of the escrow account which has found favour in India?

Escrow is a band-aid to a chronic problem. It is not the solution. The ultimate answer lies in improving the health of the electricity boards. This can be done by setting the tariffs right. Apart from rationalisation of tariffs, there should be budgetary allocation which covers the actual deficit. Another important step to be taken is metering.

Privatisation of distribution is essential after which cash flows will get going. As a follow-up, transmission and generation should be privatised. Phlippines did it that way.

In telecom, the regulatory environment needs to be settled without which it is very difficult to do business. It has, however, come a long way and only residuary issues are left.

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First Published: Wed, February 16 2000. 00:00 IST