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Power reforms under review

December 07, 2005 12:08 IST
The Sonia Gandhi-led national advisory council has said that privatisation of electricity distribution is not a "silver bullet" and has recommended that public sector undertakings play a more meaningful role in the energy sector.

"Privatisation is not the silver bullet in power sector reforms. The experience of Delhi and Orissa have been disturbing," the NAC said in a presentation to the government.

The NAC observation is significant as Prime Minister Manmohan Singh has intervened on its advice and has helped amend the Right to Information Act, the National Rural Employment Guarantee Act and the Scheduled Tribes (Recognition of Forest Rights) Bill.

The Budget also provided almost the same amount of funds for social sector schemes as recommended by the NAC. The UPA government is considering a new energy policy, which is expected to depend heavily on NAC inputs.

The presentation has also raised question over the efficacy of the Rajiv Gandhi Grameen Vidyutikaran (rural electrification) programme, terming decentralisation of energy projects as "hot air". "There is no guarantee that this will succeed where others have failed," it said.

The scheme, launched earlier this year despite protests from the finance ministry, envisages a central grant of 90 per cent, while states are required to chip in with 10 per cent of the project cost. Earlier, the Centre had footed 40 per cent of the bill.

The presentation also sounded caution on the question of nuclear energy production even after the recent accord with the US in this area.

The government's projection of a 10 per cent share of nuclear power in all energy consumption in India is termed ambitious by the NAC. Instead, a 5-6 per cent target for nuclear energy by 2010 was more realistic, it said.

The trend in the last decade of unbundling of state electricity boards, however, does not find favour with the NAC.

"PSUs in the energy sector are important, and a multi-sectoral approach is needed to deal with the issue," the presentation said. The NAC has, however, recommended strict enforcement of anti-theft laws in the power sector.

The main problem with India's energy position, according to the NAC presentation, is an "institutional gap". For this, the panel recommends that an energy policy board be set up.

The prime minister's energy co-ordination committee and the Planning Commission are not considered adequate for the purpose since the former "deals only with energy security" and the latter suffers from "institutional overload and fatigue".

An intensified diplomatic effort to explore overseas energy sources has been encouraged.

On whether private investment is to be encouraged in the coal sector, the NAC has only said that "coal is the only PSU monopoly left in India and needs massive investment and technology". Where this investment is to come from has not been detailed.

Other recommendations of the NAC include "ethanol from sugarcane as a mandatory mix with petrol". This should be good news for sugarcane farmers, especially in Maharashtra. The need to improve public transport and mass rapid transport systems has also been underlined by the NAC.

NAC's energy policy paper

  • Seeks- greater role for PSUs in the energy sector
  • Advises against unbundling of state electricity boards
  • Suggests that an energy policy board be set up
  • Questions the efficacy of the Rajiv Gandhi Grameen Vidyutikaran
  • Recommends a 6% share for nuclear energy by 2010, instead of the
    current goal of 10%
Nistula Hebbar in New Delhi