Call for 'heavy' government investment in power sector

The Confederation of Indian Industry (CII) has called for "heavy" government investment in the power sector and described it as the only option in the present circumstances in the country.

"Though the Electricity Act 2003, which is revolutionary in many respects, was promulgated in June last year, I do not see any substantial development in the power sector in the next four-five years due to some grey areas in the Act. The government is also learnt to be re-thinking on some provisions causing uncertainty over the Act's future shape. Private investment in power is likely to be limited and foreign investors will stay away till things clear up," said Banmali Agrawala, vice-chairman, Maharashtra state council of CII, and an expert on power sector.

Addressing industrialists at a joint meeting with the Vidarbha Economic Development Council (VED), Agrawala said there were certain issues in the Electricity Act which were still to be sorted out.

He said that until this was done, little development could be expected in the power sector.

He said the regulatory commissions were yet to fix wheeling and cross-subsidy charges due to which the changes proposed in the Act could not be implemented.

State electricity boards (SEBs) had been asked to provide open access, subject to availability of capacity. But the Act was silent on the deadline till when the boards were to provide open access, Agrawala said.

Group captive power generation had been exempted from cross-subsidy charges, but this was being opposed by existing utilities, even those in the private sector.

The issue was being debated and a final word was awaited, he said.

As electricity duty was outside the purview of the Electricity Act, a state government could impose any rate of electricity duty. This could act as a barrier to captive power generation, Agrawala said.

The Act also does not provide for multiple players in the same geographical area.

The existence of multiple players leads to competition which in turn leads to lower tariffs and better service for consumers, he said.

There were also some other fundamental issues which had been dogging the power sector since decades and needed to be addressed before moving into the new scenario, he said.

These included the Rs 40,000 crore accumulated losses of SEBs, transmission and distribution losses, poor infrastructure and poor quality of power.

Founder president of VED Govind Daga mooted the proposal of industrial consumers forming groups to decide their requirement of power and subsequently procuring coal and other fuel for SEBs.

They could give the SEBs the required quantity of coal, get the power and pay the SEBs the conversion charges, Daga said.

This would be a win-win situation for both the consumers as also the fund-starved SEBs, he said.

Agrawala said the CII would put forth the proposal to the state government. Prominent industrialists and businessmen attended the meeting.