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Home News Power Sector News Bogus arguments of resource crisis in power sector

Bogus arguments of resource crisis in power sector

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(This is the first part of the study report: "India's Power Sector: Problems and prospects." This study was supported by the National Confederation of Officers Associations of Central Public Sector Undertakings (NCOA), the Electricity Employees Federation of India (EEFI), the all India Federation of Electricity Employees (AIFEE), associated unions of these confederations and the Kerala State Electricity Board Officers Association.)

The objectives of the study were briefly spelt out in a theme paper circulated in January 1992 as below:

(i) Objectively evaluate the success and failure of the national policies as well as the institutions and enterprises that came into existence since national independence.

(ii) Examine critically the implications of the recent policy initiatives by the Govt. of India.

(iii) Explore alternative policy perspectives taking into account the problems of the national economy as well as the strength and weakness of India's power sector. The report was not intended to be an exhaustive academic documentation on the subject. It has however tried to capture the essentials, in order to facilitate an objective evaluation of the Indian experience in power development.

Electrification of independent India was a planned initiative through public sector. Per capita electricity consumption increased sixteen fold during the last four and a half decades while per capita GDP has only doubled. Electricity prices and costs in the country, being only half or one third compared to those in developed
countries, arc among the lowest in the world.

During the four and a half decades of self reliant development India has learned the art of designing and manufacturing power plant equipment. Eighty percent (around 43000 MW) of the generating capacity added since independence was from indigenous equipment. Indian equipment is cost competitive and of internationally accepted quality.

Despite these achievements, India's power sector faces a serious crisis today. The planned self reliant path had suffered its First major set-back in the late seventies when the global power equipment monopolies started a major marketing offensive in the Indian market. World Power Station orders had tumbled to a level well below
10,000 MW a year by the mid-eighties from a peak of 76,000 MW recorded in 1974, the year of oil crisis. NTPC and BHEL were cleverly used as the conduit for forcing high cost equipment and technologies on India's power sector from the late seventies.

The overall structures created in the power sector, as part of the Nehru - Mahalanobis model, could in a way survive these market offensives of global monopolies for about a decade. But the new crop of technologies, instead of reducing the cost of electricity, jacked it up several fold. Cost of adding new capacities more than doubled in real terms with in a short span of ten years and the increased costs of electricity could not be passed on to the people because of social, economic and political reasons.

State Electricity Boards have become bankrupt in this bargain and this coupled with the higher investment costs for power has precipitated the so called resource crisis. The planning commission and the department of power keep a Nelson's eye towards the reality of abnormally inflated investment costs. They refuse to look at the possibilities for reducing costs by standardisation and rationalisation of plant and equipment, by manufacturing and constructing them on the basis of long term national plans and by minimising costly imports. In this sense (he much talked about resource crisis is more imaginary than real.

Inspired as they are by the theories of supply side economics, the World Bank has put up a simplistic solution: jack up electricity prices so that power equipment manufactured by the high cost economies of the developed world becomes cost effective in the Indian environment. The proposed NTPC-ABB joint venture and other foreign equity companies for generating and supplying bulk electricity to SEBs on a cost plus basis are its typical solutions.

Even more, the World Bank is insistent on creating a transmission monopoly company in the country that could ultimately dictate terms of future developments in India's power sector. It has already announced a one billion dollar loan for all these purposes, all in the name of helping to solve the 'resource crisis'.

Bogus arguments of a resource crisis are thus cleverly used by the Government of India in collusion with the World Bunk for merrily contracting foreign loans, for inviting global monopolies of power equipment to invest in electricity utilities in the country thereby destabilising its organisational and technological capabilities. So called structural adjustments at the macro-level have thus degenerated into policy interventions at the micro-level.

Consequences of these new policies will be tragic and the emerging scenario is depressing. Outlines of an alternative are given in the concluding section of the report. We will be only glad to work them out in more detail as a second phase of the study. But that will not make sense unless the national government retraces a good many of its suicidal steps.

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