The Hindu Business Line : High-voltage reforms

If the news from the States is any indication, the power sector, one of the most critical to higher growth and yet the most moribund, is finally getting off the ground. Various States have sought the 4,000-MW projects, spurred no doubt by the proposed four, one each in Madhya Pradesh, Maharashtra, Gujarat and Karnataka. The Centre has wisely chosen these States for the mega projects as their power shortages are beginning to tell on their industrial performance. Also, such projects in these States would attract investments more readily and provide the guideposts for similar effort in other, more backward States. It was hardly surprising that some 35 domestic and global private companies, including the state-run National Thermal Power Company, expressed interest in the projects. Buoyed by the response, the Centre has expressed a determination to award most of the proposed projects over the next twelve months. These are brave sentiments indeed and if a steady course is maintained, the country should witness a power revolution at the onset of the Eleventh Five Year Plan.

All this assumes smooth sailing for the mega projects after the initial enthusiasm; often have such assumptions floundered on the rocks of bad policy and political expediency when it comes to the most critical issues plaguing the sector currently. It is all very well to open the doors to private investments, luring them with tax-breaks and coal supply linkages. But the stickier problems are `downstream'; transmission and distribution losses, power thefts and giveaways by ruling parties that condone one and sanction the other. State-run power utilities even now function like playmates of the ruling powers despite the corporatisation of some.

The Centre would do well to proceed with caution. It has to take into account the fact that many States have not responded with alacrity to reforms now in place. For instance, Central funds to States to reform the power utilities sector have often not been passed on for extended periods, from six months to several years. Clearly, the Accelerated Power Development and Reforms Programme (APDRP), under whose aegis the funds have been distributed, is not effective enough and a high-level task force has suggested more qualifiers for States requesting the Centre for power projects. One useful counter to the State-level lethargy is to allow private distribution companies access to APRDP funds besides making access to investments and incentives more stringent. Appointing special police and courts for power thefts, fixing quantifiable loss-reduction targets for power utilities, and holding States accountable through the mediation of independent regulatory commissions are reforms that brook no delay if the enthusiasm among investors for the mega projects has to show results.