Undoubtedly, the declining trend of overall performance of the government owned power industries are mainly attributed to the policy of short term gain, and the ‘monolithic’ and ‘monopolistic’ nature of business. The unremunerative tariff and unmanageable large organisational size are possibly the issues of concern. Further to this, condition of State being both owner and operator, results in dilution in regulatory mechanism. The financial position of SEBs is fast deteriorating in a situation, when the country is suffering from capital shortage. However, it requires meeting up the significant demand supply gap. Excepting one or two states, acute power shortage exists everywhere.

Hence "Changes" are necessary. Those could have been evolved through national debate, and implemented in a phased manner. Instead, the New Power Policy, declared in 1991, was prepared in haste. There was lack of transparency and scopes for subjective interpretation. It neither encouraged a national regulatory regime, nor resulted in tangible outcome. Rather State Governments were allowed to negotiate in terms, damaging to the national interest.

The terms "privatisation", "commercialisation", independent regulator", "re-structuring", "competition" were used to suit the interest of a few, not as a part of the holistic, macro level policy, "Sovereign guarantee on profit" were ensured, which is totally contradictory to the concept of competition. These irrational privileges to foreign investors have been legitimised through political interference. All these resulted in lot of doubts, misunderstanding, mistrust and ultimately a chaotic situation. It might be termed as "Lesson from changes" but "quite costly are such lesson"!

Nation today requires a FUEL LINKED ENERGY POLICY - serving the following objectives :

1. Self - Reliant, Sustainable, Eco-friendly Growth,
2. Economic and efficient performance,
3. Austerity - Effective utilisation of existing capacity and conservation,
4. Consumer satisfaction and security of supply,
5. Rational and Transparent Regulatory Regime,
6. Balanced Regional Development.

In functional term the objective reality calls for a few modifications on priority basis.

The concept of Regulator is not new in Indian Electricity business. Central Electricity Authority (CEA) at centre and subsequently Regional Electricity Board (REG) were formed to serve this purpose. CEA’s role was devalued and the organisation has been converted to a mere extension of Ministry of Power.

Regulators are required at Central / Regional / State level and they should have autonomy, to perform duties. At the same time, the process of regulation will be normative and transparent and would naturally be open for public scrutiny.

A good system of regulation must achieve a balance between ‘consumer satisfaction’ and ‘return to investors’. As far as practicable, the basis of operation should be normative with provisions for incentive and penalty with respect to efficiency in operation. A straightway rate of return regulation might guarantee an adequate return on capital, enabling cheap investment finance, but it will not necessarily provide the requisite incentive to increase efficiency.

Electricity is qualitatively different from most of the commodities. It cannot be entirely governed by market forces - particularly in Indian context. Even if a competitive market exists for power generation; transmission and distribution, which are network activities, remain natural monopolies within a boundary and must operate under a regulated framework.

Electricity business has been allowed to run, in this country, as non-commercial basis, resulting in poor financial health of SEBs. The approach towards commercialisation is essential and for that rationalisation of tariff has to be done. But this process must be compatible with overall economic process of the country. It is neither practical nor desirable to introduce a system with complete withdrawal of subsidy, but its level has to be reduced gradually.

Today’s Power situation cannot be left open to be tackled at State level only - it calls for an integrated national approach. Operationally, each State runs synchronised in respective Regional Grid and any addition of capacity by any utility require centralised statutory approval for technical reasons. There are so many other important factors e.g.

• River planning - utilisation of hydro potential,
• Hydro-Thermal mix for a Regional Grid,
• Inter regional power exchange,
• Grid security and protection system,
• Evacuation of power and transmission network from central sector plants,
• Fuel linkage and Transportation,
• Environmental impact analysis.

All these require centralised co-ordination and monitoring.

Allowing States to decide on setting up Thermal Power Pants upto 250 MW (without CEA clearance) led to a situation, where liquid fuel (imported naphtha) linkage for 12000 MW plant has been cleared by Ministry of Power against proposals totalling 33000 MW. A country, having trade deficit of nearly 5 billion dollars, will run base load stations on imported fuel, keeping untapped indigenous reserve of coal, thorium and hydro potential.

The "monolithic", "centralised", "monopolistic" structure of State Electricity Boards is, at times, difficult to manage, particularly in distribution and revenue collection. Hence, a "change" can be thought of. But what should be the model of "change"? No model (UK, USA or World Bank) can be just replicated in Indian scenario. There is a general bias to imitate trendy solutions that have yet to prove themselves even in the context of more developed countries.

First of all, there cannot be any single model applicable to all the States. "Unbundling" essentially is not the answer. SEBs may continue as a vertically integrated entity. The business of distribution can be decentralised in Zones with autonomy. The Zones should, as far as possible be a judicious mix of all types of consumers.

Similarly Generating Stations will also be considered as individual entity and will compete with each other. These experiments are to be tried for considerable period before opting for any qualitative change.

In last year Government was in extreme hurry to implement some decisions on Power Sector, which in contrary to talk a stand on reversal of earlier mistakes, accelerated the pace of ruining the industry. For example, it has declared that for investment upto Rs. 5,000/- crores, it is not required to obtain OEA clearance. Electricity is not like other commodity - it can’t be stored and the generation must be appropriately linked with transmission and system operation for attaining stability of the system. Normally CEA does this job of central planning. Just to suit the interest of IPSs (private investors), who does not want to go through the regulation, such an irreparable damage was done.

A national plan n Power didn’t include the vital aspects like Rural Electrification, use of non-conventional energy sources etc. Subsequently an ordinance was issued for private participation in T&D with effect of changes in Electricity rules and Acts. Prior to that no discussion was held in Parliament. Private participation is required in selected areas but not sacrificing the rights and assets.