Privatisation has a bigger role in Indian Power Sector?
Electricity deregulation and privatisation is referred to as ‘liberalisation’ by its advocates who use the term to disguise what is in essence a massive shift of ownership and control of electricity from public to private hands, in the name of economic efficiency and in the cause of private profits. ‘Liberalisation’ has meant that maintenance teams that were once fully staffed have now been dramatically cut leading to frequent equipment failures. It has meant that privately owned electricity conglomerates are able to blackmail governments into bailouts and high prices with threats of blackouts. Moreover, electricity prices will be based on market forces rather than, the cost of production.
Privatisation of electricity has been tried in various other countries also like Australia and Brazil etc. However, the fact remains that privatisation in this sector has failed in these countries.
The biggest question is, electricity is a basic need then why should we trade it like a commodity in the market ? Since it is an essential service i think it needs to be controlled and supplied by governments to ensure its availability, reliability and affordability.
Nothing in this globalised world comes for free. Everything has a price associated with it. It is said that Privatisation would bring down the tariffs, but i would like to bring forward the fact that since privatisation of distribution of electricity in Delhi has happened in delhi, the tariffs have increased. Moreover, many irregularities have been brought to our notice by the CAG audit. The decision of Arvind Kejriwal’s government in Delhi to have the accounts of the three distribution companies (discoms), subjected to a CAG audit has had immediate repercussions. The three discomshave moved to the courts against a CAG audit and the two Reliance Anil Ambani Group distcoms — BRPL and BYPL — have also threatened long power cuts as they claim they have no money to pay NTPC its outstanding dues. The matter has also been escalated with the Delhi government asking DERC, the Delhi Electricity Regulator to revoke their licenses under section 19 (d) of the Electricity Act, 2003.
In 2005–06, the government first kicked off a policy to set up 16 power plants of 4,000 MW each under the brand name Ultra Mega Power Projects (UMPPs). Many private players in the name of Privatisation participated in the bidding process of these UMPPs. Anil Ambani backed Reliance Power Limited was awarded for setting up of 3 UMPPs. However, they exited the proposed UMPP in Tilaiya(Jharkhand) moreover they have requested PFC to acquire the entire stake of its subsidiary Sasan Power Ltd, which operates the UMPP in Madhya Pradesh. In fact, Tata Power, which operates the functioning UMPP at Mundra in Gujarat, has been demanding an increase in tariff. Moreover, i would like to bring the fact that to add to the misery, the Union government had to cancel the two-year long bidding process for two UMPPs in Tamil Nadu and Odisha after all private companies pulled out and government-controlled NTPC and NHPC emerged as the winning bidders.
To generate power in Thermal Power Stations, coal is needed, if private player are allowed to mine coal, indiscriminate mining of resources will be there which will flout various environmental concerns and displace various people living in its vicinity. I would like you to remember the POSCO company case which tried to set up its plant in India. There was huge hue and cry over the plant due to displacement of people and various environmental concerns hence the plant couldnot come up.There is also a similar case of Dhabol Power Plant. Here, Enron used its political influence with US embassies and the CIA to win a $3 billion contract to build the Dhabol Power Plant south of Bombay in 1992. This was one of the largest foreign investment in India. Locals protested the environmental and social impacts of the project whose electricity was both unreliable and heavily polluting. It charged so much for electricity that the state government ended its agreement to buy the electricity in June 2001 and the plant was forced to shut down.
There are various rural electrification works in various villages of our country in progress. These projects have very low financial feasibility and viability and no private company wants to pitch in and take the project. Almost 100% of these works is being done by Public sector. Hence we can draw that private players do everything for economical gains leaving aside the social and emotional content needed to run this sector.
In transmission sector also privatisation has failed. Each party after building its Transmission Line on its defined specifications, needs and wants can face problems of connecting its grid with the main grid.
I think, you must all be familiar with the blackout (Power Outage) of July 2012. The restoration of the grid was achieved in a record time. Had there been many private grids of various players then poor coordination, cooperation and communication might have resulted in cascading failures and might not have resulted in the early restoration of the system. A unified System is always better than the Segregated System in order to enjoy reliability, accountability, affordability etc.
I would like to bring the fact that despite presence of various private players, majority of the contracts are still awarded to POWERGRID under the TBCB route.
As you might be aware that there have been increased instances of cyber security threats and grid hacking. All the government companies have been directed to judiciously use the Chinese communication equipments in Transmission lines and at generating stations. Whereas, no similar guidelines exists for private players. These equipments can create security hazards and can lead to increased disruptions.
There are not only operational lapses in privatisation but there are various other pitfalls also. Different companies have their different policies, strategies, and protocols. Some want to scale up and some want to scale down in order to reduce their debt etc. Keeping in mind the above fact, it would be highly uncertain to plan the future recourse of capacity addition and extension in this sector. The supply demand gap may widen and could lead to cascading failures. Moreover, if the same is governed and controlled by a govt company, predictions could be figured out which will lead to more availability, reliability and affordability of electricity.
Despite presence of private players in Indian Power Sector, still 90% of the Generation, Transmission and Distribution is controlled by public sector. India currently has a installed capacity of 330.15 GW and is expected to register double digit growth in the coming years. In order to meet these demands and to make India reach its goal of “Power For All”public sector needs to come up with more innovative solutions and schemes in order to bridge this gap.Various schemes are currently being run by Govt. is order to revive this sector. The govt. has also formed various committees to study the future needs of this sector and how the gap between the demand and the supply can be bridged.
There is a famous saying which says “Precaution is better than cure”. Hence we need to move the correct steps in order to turn them in our favour in the future recourse of time.
The vast majority of people in the country where privitisation in electricity is allowed has been played and are its victims rather than its beneficiaries. Jobs have been lost, electricity prices have risen, service and reliability has fallen, pollution has increased, and taxpayers have had to bail out private electricity companies in bad times without receiving any dividends in good times.