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Create Success Stories in Power Sector- urges IndiaCore - IACC
Paper
The
IndiaCore-IACC Paper, "Indian Power Sector- The Way Forward" presented
in the 2nd Round Table on Power organized by the Indo-American
Chamber of Commerce in PHD House on July 7, 2000 emphasized the
urgent need for creating success stories in the Power Sector.
Significantly, the Round Table organized at a time when the Indian
Capital is witnessing power riots had the participation from a
very broad spectrum of players. The IndiaCore - IACC paper highlights
the fact that in terms of Per Capita Consumption of electricity,
India is far below other developing nations in Asia. Even if India
was to have Per Capita Consumption of the same order as Thailand,
it would need to add 1,00,000 MW overnight. At the same time in
order to sustain the economic growth one needed capacity
addition of nearly 10,000 MW every year. The paper has assessed
the annual investment requirements in the power sector at US $
50 billion. This amount is almost double of Central Plan Outlay.
Given
the fact that private sector's participation was essential for the
development of the Power Sector, the report recommends reinforcement
of investors' confidence and interest, which due to the delays in
various power projects has been progressively on the decline. One
of the measures suggested in the report was to create success stories
by bringing about financial closure of projects that have achieved
most of the clearances. According to the report, this will send
appropriate signals to the global capital.
A
Portal dedicated to Core Sector of Indian economy, IndiaCore.com
has also been involved in organizing focussed conferences to arrive
at deeper understanding of the issues involved. The decision to
link lending to IPPs on the basis of reforms indicators was first
mooted in the IndiaCore Conference "Power Sector at Cross Roads:
Issues & Concerns" held in Delhi on April 19-20, 2000.
It was also in this conference that the Electricity Bill- 2000 was
debated at length and these deliberations were an input into the
4th and the 5th draft of the Electricity Bill.
The
high level participation in the Roundtable lead to several crucial
issues being highlighted. The meeting was attended by the present
Power Secretary, A K Basu as well as the former Power Secretary,
V K Pandit. The DVB Chairman- Jagdeesh Sagar, Ajay Shankar- Jt.
Secy, Ministry of Power, Gajender Haldea of NCAER and architect
of the Electricity Bill, Representatives from the Power Industry,
The World Bank, State Bank of India, Power Finance Corporation,
Senior Executives from Power Companies were among those present
at the discussions. The meeting was chaired by Ravi Wig of the IACC.
According
to Ravi Wig, the Power Sector is the facilitator of the Indian economic
success and this Sector could garner a lot of the foreign investment.
This is possible only if the Power Producers are protected from
financial problems.
The
Secretary, Power- A K Basu unveiled some aspects of the new Electricity
Bill 2000 which is in the final stages of preparation and is to
be soon introduced in Parliament.
The
most important feature of the Bill is that it will replace all the
earlier Bills with a single Act. Thus the three existing Bills of
1910, 1945 and 1998 will be superseded by this Bill. The Bill also
seeks to do away with the State Electricity Boards (SEBs). These
will be unbundled into separate entities handling Generation, Transmission
and Distribution. However if any State wanted to continue
with the State Electricity Board, it could do so by issuing a separate
notification to this effect.
In
the Electricity Bill 2000, a Regulator has been made compulsory
to regulate tariffs for Generation, Transmission and Distribution.
Generation has been completely delicenced and only the tariffs are
to be approved from the State or Central Commissions. For Captive
Power Plants, even that would not be necessary. Transmission Sector
licences would be issued by the Central or State Transmission Utility.
Distribution has been given high priority and metering of power
has become compulsory; in fact a date has been set by when 100 per
cent metering is to be completed.
Some
of the other features are trading in power, open access to power;
the CEA is to be made an advisory body to the Government and the
TEC -the techno-economic clearance criteria would be dispensed with.
Most important of all from the investors' point of view is that
Escrow has been simplified to a great extent.
Earlier,
Basu acknowledged the fact that the SEB's were in a bad shape and
for the Private Sector to invest in the Power Sector, they had to
have some assurance on their Return on Investment (ROI). Hence non-conventional
methods of power generation like solar energy had to be used and
encouraged. There were plans to add 100,000 MW of power by the year
2012 and provide power to every one and the investments necessary
for this were to the tune of Rs.7000,000 million and this kind of
money was not available with the Government. 100% FDI has been permitted
in the Sector and the limit has been removed. Some development has
taken place but
a project of this magnitude cannot be achieved overnight.
The
fact that the Generation mix was getting skewed with less hydro
capacity was also highlighted during the conference. A K Mathur
, Project Director at Shrinagar Hydel Power Project in UP, was of
the opinion that escrow was a major problem beingfaced. During
project appraisal, they are loaded with exchange rate variations
and that the promoters are asked to offload their equity to Indian
financiers. Resettlement and rehabilitation was another area of
concern. According to Mathur, the people preferred sustainable employment
opportunity rather than land in the plains. It was felt early approvals
were necessary to bring about capacity addition in hydro sector.
So far, only 15% of the realizable hydel potential had been tapped
for power generation.
Several
important issues were highlighted with regard to hydro sector. According
to one of the participants, prior to new hydro policy, there was
no restriction on capacity of hydel power that could be developed
by private sector. It was felt that tariffs should be re-examined
and flat and front loaded tariffs need to be evaluated.
V
K Pandit, the former Power Secretary said that the commercial orientation
requires structural reforms. He also said that if capacity expansion
were to be linked to distribution, it would give better results
and hence reforms in the distribution setup were more important.
The excess capacity in the eastern region could not be transmitted
to deficit areas due to the absence of a
national grid.
Ajay
Shankar, Joint Secretary in the Ministry of Power was also of the
opinion that the problem of distribution should be tackled first.
A climate of opinion for the rehabilitation of resettled people
and concerns for their livelihood was also necessary.
One
of the participants suggested a National Energy Plan should be worked
upon in which the State should identify power project sites keeping
in view issues related to environment, fuel, load centres and power
evacuation. Jagdeesh Sagar, the Chairman of DVB said that investment
in distribution should be made attractive.
The
importance of the Roundtable was heightened by the presence of the
Secretary, Power and the fact that he unveiled the Upcoming Electricity
Bill 2000. The interactions with the other participants also helped
discuss the problems facing this sector.
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