The Hindu Business Line : `Revamp power sector policy to attract private investments'

AS availability of energy to ensure 7 per cent to 8 per cent economic growth per annum on a sustainable basis gets priority, the state of energy sector presents a none-too-rosy picture.

Reform of the country's power sector has been long in the making but woefully short of any substantive progress as even the Electricity Act 2003 to provide open access power is under review. With crude oil prices straying into stratosphere, there is not much margin for manoeuvre unless import dependence is minimised through various options including equity oil, conservation and entering into long-term contracts for uninterrupted supplies.

As energy is a key input for development, its importance assumes added significance when demand and supply management — be it coal, power or petroleum — becomes critical.

An expert group on energy policy under the Chairmanship of Dr Kirit S. Parik, Member, Planning Commission, is meeting for the first time here on Thursday to discuss formulation of an integrated energy policy for the country.

Dr Parikh is former vice-chancellor of Indira Gandhi Institute of Development Research Institute and a member of the Economic Advisory Council of the prime ministers of the past, besides having been a member of the highest-level advisory bodies of the Government on environmental planning, science and technology policy and energy policy.

Here is an excerpt of an interview he gave to Business Line at his office in Yojana Bhawan:

On the need for an integrated energy policy: At the moment, different sectoral policies are not connected so that inter-fuel use is not clearly the most optimal that we should have. So we need to think in terms of what kind of right pricing policy for different uses should be so that people select the right fuel for that particular use. This is the first important element of integrating things. We also see that even within the fuel sector there are host of issues — inefficiencies, problems about future supply and security of supply. We should be able to really make sure that domestic supply keeps up with demand. That can be done through public-private partnership.

The goal should be that everybody gets energy at reasonable price-close to cost price — which a competitive or well-regulated market should be able to deliver. We also subsidise energy to a lot of people and while we accept the need to subsidise some consumers, how do we provide these subsidies so that it reaches the targeted group in a self-adjusting fashion? It is this kind of system that we should work out and give incentives to people for efficient use of resources.

State after State going for free supply of power is a very undesirable development and unless you have an appropriate charge from farmers, problems of inefficiency, over exploitation of ground water, water logging and diversion of energy to kerosene and other uses would crop up.

If energy is measured and the farmer pays for it — it is his own money that is going for every kilowatt of power he is using; if that happens, some x money is credited to the farmer account and whatever is left after use for electricity he can retain it. The x amount is fixed. If every farmer is given something i.e., energy consumed to energy required to irrigate one hectare of land, that much of money you give every farmer and if he wants anything more than that he should pay for it. If you use less energy you save it.

Thus you will have incentive to save energy. One can have more elaborate solutions — one can use automatic bank transfer and through many other ways of implementing this entailing less transaction cost and more efficient way of reaching the targeted farmer.

Power sector policy must be restructured to make it really attractive for private investment to flow. There is no reason to single out super thermal power station for duty waiver and other concessions, which must be given to every power plant.

If the potential customer like State electricity boards (SEBs) is financially bankrupt and does not pay to NTPC or Coal India, which investors would come into this sector?

On oil price flare-up: The problem today is not getting oil but its high price. If oil prices are looked at constant dollar prices, the 1979-80 dollar prices were much higher than what it is now.

It is still not bad as it was when oil consumption to GDP ratio was high, while it is somewhat smaller now. We do not have scarcity of foreign exchange so that import of oil does not mean that all other imports have to go down. You have buffer stock of dollar and buffer stock of oil.

The latter costs money and it is wasting asset. Oil security could be obtained in many ways and buffer stock of oil is needed for some contingencies and what should be the level the committee will look at tomorrow meeting.