The Hindu Business Line : Cranking the power reforms

THE UNION CABINET'S approval last week of a National Electricity Policy affirms its commitment to reforms in the power sector. Drafting the policy and getting it approved by all stake-holders is, of course, just the first step in implementing the Electricity Act, 2003. For the Centre, this may have been the easier aspect of the Act to comply with. The more difficult initiatives such as rural electrification, unveiling a tariff policy and putting in place a competitive bidding process lie ahead.

Together these steps are expected to make the power sector competitive — for generators to sell to the customer of their choice, for distribution licence-holders (assuming that multiple distribution licencees become a reality) to buy power from the cheapest source, for anyone to use the transmission system on payment of a charge or for consumers to access power at competitive rates. In short, a vibrant power market where only efficiency will matter. Of course, strong and independent regulatory agencies are needed at the States too to ensure that distribution licencees do not indulge in cherry-picking — weaning away lucrative customers — and provide universal coverage in their area. The policy, though delayed to consider the sensibilities of the Common Minimum Programme and the views of the States, comes even as there is a demand by the United Progressive Alliance Government's supporters, particularly the Left parties, for a review of the Electricity Act itself.

The Electricity Policy's objectives are to make power available to all households in the next five years; meet all demand by 2012; end peak shortages and create spinning reserve; raise the annual per capita consumption of electricity to over 1,000 units by 2012; ensure minimum lifeline consumption of one unit a household a day; protect consumer interests; and supply power of international standards at reasonable rates by 2012. Not very different from what politicians and power ministers of various hues have said before. But given the track record, some of these goals such as energising every household in the next seven years may well be too difficult to achieve, unless there is political resolve to push reforms fully.

Since the policy has been framed after extensive consultations, especially with the States, it is to be assumed that all the players agree with its goals and, hence, would exert themselves to achieve them. The UPA Government has now shown its keeness to go ahead with reforms even if it has to take on political opposition from within. Now, the Government must push ahead with other policy measures to achieve a full financial turnaround of the power sector. There are signs that foreign investors may once again be interested in the sector and steps such as these should raise their comfort level. Ultimately, competition should lead to efficiencies and result in better choice for customers.

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