The CERC’s decision to impose a cap on power that is traded across the country is a retrograde move. As you have rightly pointed out (‘No price caps, please’, September 17 ), caps only serve to exacerbate a shortage. If power prices go up, this serves as a signal to investors that it is profitable to set up power plants. Once this happens, it will ensure there are greater supplies. The higher power price will also tell users that it is time to reduce demand. Putting an arbitrary curb on prices prevents both these price signals from being transmitted — to either those who will produce more power or to those who will consume less power. India tried to introduce price caps for the first 45 years of its history and with disastrous consequences. It is surprising that the electricity regulator should be thinking of such caps in this day and age. Aren’t there any economists in the Central Electricity Regulatory Commission?
Uday Gupta, Gurgaon
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