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Stuck at the basics
NEARLY A DECADE after the commencement of economic reforms in the country, one sector that has not met the hopes that were raised initially is power. And, the reasons are not far to seek. The admission by the Union Minister for Power, Mr. Suresh Prabhu, that the approach taken had not yielded satisfactory results should mark the process of correcting the reforms process that has failed in this critical sector. Restructuring India's economic institutions is a task that has engaged considerable attention during the decade. It is also a task easier to discuss than to implement. In a way, the reforms in the power sector have, of late, evoked more scepticism than hope. Among the several sectors that have to be restructured, this is one in which the Union Government has a lot to say, in terms of policy guidelines and agenda-setting, but has little to do as the implementation - generation, transmission and distribution - lies with the respective State Governments, electricity being a concurrent subject in the Constitution. Thus, the nation has seen several situations where sensitive policy recommendations are, at best, adhered to in the letter. This core-periphery conflict is an important part of the problem.
The recognition that reforms in the power sector had started from the wrong end - capacity augmentation - is not an entirely new one; critics in the past had referred to it, especially the professional voices. Those voices of dissent were, however, lost in the larger rhetoric of the anti-reformers. In a way, an uncritical opposition to the reforms, based more on broad-brush statements, rather than reasoned arguments, has done harm to the reforms, not just in the power sector, but in the overall process as well. Now that the Union Ministry of Power has commenced a process of correction, it is important that the mistakes of the past are not repeated. It is equally crucial that the approach taken so far - augmentation of power generation - is not totally abandoned. If there has been one mistake of the past that has to be corrected in the years ahead, it is the failure to comprehensively address issues relating to efficiency. Despite plans and promises, transmission and distribution losses continue to plague the power sector.
That there are no easy ways is obvious. The crux of the problem, and the most complex one, is reforms at the distribution end, in specific terms, the State Electricity Boards (SEBs) - an area where the Union Government can do little. The already strained finances of the SEBs are further complicated by the fact that of the total power generated, only 55 per cent is billed and only 41 per cent is realised. The reforms in the power sector cannot progress unless the core issues - tariff structures and transmission and distribution losses - are addressed square on. It is also time to prepare the ground for the distribution reforms. A very important task ahead is to build public awareness and opinion on the urgency to move away from the path taken so far. Central to this exercise should be the explanation that reforming the power sector is a part of the larger process of increasing the role of the state as an effective provider for the nation's social needs. While the imminent collapse of the power system is a compelling argument for reforms; an equally serious one is that of a continued drain of public resources away from the all-important allocations to the social sector - education, public health and infrastructure - which was the core idea behind economic reforms and restructuring.
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