While India’s telecom reforms began in 1994, the private share was at little as a tenth even as late as 2003. Today, it’s around three-fourths. In 1994, a little over 1 per cent of Indians had phones, today it’s around 30 per cent and is likely to cross 50 per cent by 2010 (the government target for 2010 was 15 per cent!). Call rates on mobile phones are down from Rs 32 per minute to around a rupee, long-distance rates from Rs 50 for STD and Rs 80 for ISD are down to around Rs 2; leased line rentals are down to a tenth … the list goes on.
Though private sector players have been around in the power sector for much longer, barely a tenth of investments in the last Plan were made by the private sector. As a result, in the last three Plans, for instance, we’ve achieved just 50-60 per cent of our targets for setting up fresh power capacity; against the 2005-09 target of providing electricity to 23 million poor households, the 2005-08 achievement was just 2.4 million; a little over a third of the 2005-08 target for providing electricity to villages was achieved … this list also goes on.
Much of the difference in the two sectors has to do with the regulators in the two sectors, the Telecom Regulatory Authority of India (TRAI) and the Central Electricity Regulatory Commission (CERC). Nonsense, is the immediate response, where’s the comparison? The CERC has no jurisdiction over the state power utilities, which is where the real problems occur, this is where the huge losses occur — until the Rs 33,000 crore of net subsidies go, the sector cannot progress … the argument is a familiar one.
The jurisdiction is an issue — more on that later. But keep in mind that subsidy levels in telecom have also been truly huge — the monstrous STD/ISD profits are what used to fund the hugely uneconomic local calls — in even 2003, the cross-subsidy element (called the Access Deficit Charge, and levied on all long-distance calls) was as high as 30 per cent of the sector’s turnover.
The critical difference was the TRAI laying down rules, and tariffs, to ensure telecom networks were connected to each other. If, when Airtel began its services in Delhi, its calls were not carried by BSNL’s long-distance network to Mumbai, who would want to buy an Airtel phone? If an Airtel subscriber was not able to talk to a BSNL/MTNL customer, and all customers were BSNL/MTNL ones at that point, who would buy an Airtel phone? In other words, if these rules were not thought out, and enforced, there would be no private phones today. If the phone firms with the larger networks, BSNL earlier and Airtel today, were allowed to jack up rates for such services at will, there would be no competition. To ensure the tariffs were not arbitrary, TRAI looked at all the traffic volumes and costs — charges were lowered on this basis. To be sure, the TRAI got it awfully wrong many times (in one case, it got the ADC wrong by nearly 100 per cent!), but the direction was always clear.
In sharp contrast, there are no such rules, let alone tariffs, in the power sector. So, a sixth of India’s generating capacity comprises captive generating stations, but these plants don’t get permission to sell their power to others — if you assume a fifth of this capacity is surplus at all points in time, that’s around 5,000 MW that can be added to the national grid immediately.
Why doesn’t it happen since the Electricity Act of 2003 mandates that by 2009, all consumers with over 1MW of consumption (an average shopping mall would use this much of power) should have ‘open access’, that is, they should be able to buy power from anywhere? So, a south Delhi mall can buy power from Tata Power in Maharashtra instead of from BSES after paying some carriage fees for the various electricity lines it uses as well as a surcharge to make up for the losses caused to BSES (BSES overcharges industrial users in order to subsidise others, so when such a customer moves out, this loss has to be made good).
Here’s the problem: For Tata Power to sell to the mall, it needs permission from the Maharashtra Load Despatch Centre (LDC), it needs to use some part of Maharashtra’s transmission lines, part of the PowerGrid’s inter-state lines, and part of Delhi’s transmission lines. Invariably, the LDC doesn’t give permission, saying it has no surplus transmission capacity available. Also, the rates charged by the state transmission companies are prohibitive, and vary from time to time.
This is where the CERC comes in, as does a petition filed by three former power sector executives (former Haryana regulator VS Ailawadi, ex-Special Secretary Power Pradip Baijal and ex-Secretary Power RV Shahi) asking the CERC to do its job. The petitioners cite sections of the Electricity Act 2003 that clearly state fixing tariffs for the intra-state lines used for transmission (those parts of the Delhi and Maharashtra lines in the example) is the CERC’s jurisdiction; similarly, why not get the LDCs in various states to transparently list the availability of transmission capacity on their websites 24x7?; indeed, get the LDCs out of the purview of the state electricity boards who have a vested interest in the LDCs not granting open access permission (just a handful of captive power plants, by the way, have got such permission so far and there has been no open access for individual consumers). Similarly, the CERC had not forced states to reduce subsidy levels to 20 per cent though there is a government order to this effect … the list of what the CERC hasn’t done goes on. Will this petition change things? If the power sector is to progress like the telecom one, it just has to.
