The right kind of power

RAISINA HILL

It was in April 2002 that the government decided to appoint R V Shahi power secretary. At that time, Shahi was securely placed in Mumbai as the chairman and managing director of private-sector power major BSES.

He was obviously reluctant to give up a comfortable private-sector job with attractive perquisites for a room in Shram Shakti Bhavan in New Delhi that might give him a lot of clout, but a lot more headaches as well. The man who persuaded Shahi to take up the new assignment was Suresh Prabhakar Prabhu, who was then the power minister.

Prabhu had his own logic. A K Basu, an IAS officer, was due to retire as power secretary on March 31, 2002. Basu's appointment as the chairman of the Central Electricity Regulatory Commission (CERC), the apex power sector regulator, had also been approved. Prabhu saw in this an opportunity to have a private-sector professional (Shahi also had the experience of having worked in the state-owned National Thermal Power Corporation as the power secretary, who could speed up the implementation of reforms on the government's agenda.

Today, however, Shahi may well regret his decision and the government may also wonder if getting a private sector professional to head the bureaucracy in the power ministry was wise. Power sector reforms are mired in an avoidable controversy.

The top management of the country's largest power generating company, National Thermal Power Corporation (NTPC), has lost its trust in the power ministry. And the CERC's relationship with the ministry is now strained.

The problems began with the contentious issue of framing a tariff policy for the regulator. Just before Basu left office, he had drafted a three-page note on the government's tariff policy. But the new dispensation in the power ministry (Prabhu also left the ministry in August 2002) ignored that note and prepared a new 21-page draft.

The friction between CERC and the power ministry started that day. The regulator became apprehensive of the power ministry, which it felt was using the tariff policy to dilute its role and autonomy guaranteed under the law.

In any case, it raised other objections to the manner in which the 21-page draft tariff policy attempted to fix new norms of returns and depreciation rates. The controversy reached a point where the power ministry decided to disown the draft, claiming that it had been prepared by Crisil and did not reflect the ministry's views.

The Prime Minister's Office also stepped in and decided, in August 2003, to constitute a committee to advise the government on power sector investments and reforms. The committee, headed by Planning Commission Member N K Singh, completed its task early this month.

And soon after, the power ministry decided to take the recommendations on the electricity policy and the tariff policy to the Cabinet for its approval.

The CERC was upset because its views on the tariff policy issue were not heard, although the ministry was bound by law to seek the regulator's statutory advice on the issue. But the ministry went ahead and prepared a note for the Cabinet's approval.

Even within the ministry, many bureaucrats were surprised by the speed with which the N K Singh committee's recommendations were processed. Normally, a committee's recommendations are discussed threadbare within the ministry and the views of all important stake holders are sought. None of those formalities were honoured.

Instead, Shahi seemed to be more keen to get the political establishment to clear the proposals. A meeting between power minister Anant Geete and the Prime Minister Atal Bihari Vajpayee was held where Geete apparently got the latter's endorsement of the Singh committee recommendations.

The ministry also tried to bring round Planning Commission Deputy Chairman, K C Pant to agree to the changes. Eventually, all this did not yield the desired outcome because the Cabinet failed to take up the proposal at its last meeting.

What upset the NTPC's top management was the N K Singh committee's recommendation that the state-owned company should be split into five independent generating companies. The committee had Shahi as one of its members.

The NTPC management, which was already aggrieved the manner in which the government was trying to influence its decisions on the award of some contracts, felt that even the power secretary had endorsed a proposal that suggested its restructuring and consequent emasculation.

Shahi has a spotless track record as a professional manager. Power sector experts also recall his creditable performance as a senior member of the NTPC top management before he joined BSES. But as a technocrat heading the power ministry, Shahi does not seem to have learnt the tricks of the trade yet.