G V RAMAKRISHNA is a member of the Planning Commission, currently dealing with the energy sector. The former Indian Administrative Service officer was India's ambassador to Belgium from 1988-1990. He was appointed chairperson of the Securities and Exchange Board of India in 1990, and continued to head it through the turbulent days of the stocks scam up to December 1993. Ramakrishna has been known to hold strong views on the road that the energy sector should take. He is now assessing some of the current policies in the power sector. He spoke to Koshy Cherail on the ongoing discussion on policy formulation in the renewable energy sector, as well as new trends in the power sector
The ministry of nonconventional energy sources (MNES) is in the process of drafting a policy for the increased use of renewable energy. In the light of the plan priorities set by the Planning Commission, what should the key areas be?
The priority for the plan should be to promote research and development in alternative energy sources. Where it has already taken place, like in the case of wind energy and in solar photovoltaics (SPV), they should get out of the subsidy syndrome and commercialise it. Wind energy, for instance, is now being successfully commercialised. Cogeneration of power in the sugar mills can also be commercialised. In SPVS, the costs are coming down in the developed countries, and the subsidy element can thus be reduced. The future of nonconventional energy lies in the fact that the more you commercialise it, the more sustaining it will be.
Subsidies are being phased out, market forces are being relied upon to develop and promote technologies. Will these changes ensure equitable and sustainable energy supplies to those who need it most, especially in the rural areas?
A large part of the conventional power is already going to the agricultural sector. The massive losses incurred by the electricity boards is mostly because of the highly subsidised tariff given for agricultural sector. So, it is not entirely correct to say that the rural areas are not being paid attention. There, a selective approach is to be adopted for energy from non-conventional sources. In the hilly and remote areas spvs would be more appropriate.
How do you expect non-conventional power to stay at par with conventional power? Each state has a different policy and terms for purchasing power from renewable sources. Has the Planning Commission made any specific recommendations on this?
We have reeommended to the state governments and the power ministry that the terms should be U'riform. I have suggested that all State Electricity Boards (SEBS) should now advertise these, stating that if companies can produce power from any source and offer it at a frequency of 50 cycles at an acceptable voltage, the Boards would buy it at a price not exceeding their marginal cost of acquiring power from conventional sources.
This would ensure that even the small pockets of other alternative sources are tapped for power generation. Small generating companies of 2 to 5 mw can be set up and they can sell power to the SEB, as long as it costs them less than Rs 2.50 per unit. Power generation from alternative sources would be encouraged and investment in various types of nonconventional sources of power will increase.
Over the past few months, the states have come under pressure to reform their electricity boards. Do you see any significant changes that could make them play a more dynamic role in energy supply?
The SEBs have to be reformed. The transmission and distribution (T&D) losses and rampant power pilferage result in 40-50 per cent of the power generated, not yielding any revenue. You cannot run any industry, let alone generate power, with half your production given away free.
But it is nearly 2 years since these reforms were begun. Why are the changes so slow in coming?
Nobody is able to take politically sensitive decisions.
What is the Planning Commission's stand on the pricing of electricity ? How have the states responded to it?
You have to minimise the cost of power generation and buy power at a competitive price. If the cost of energy is high, then your capacity to price it in a consumer- friendly manner is reduced. If you have an equitable tariff structure, where high-tension users pay at the maximum rates, agriculture sector pays their dues, and the subsidy for the domestic users are moderated, then the SEBS can be made viable. They can invest more in the T&D lines and provide more energy to the rural sector. Now the SEBs are a drain on the state exchequer. In some states distribution and generation of power have been separated, and this has been effective. The arrears get transferred to the distributing company. The latter can enforce tariffs or cut off power and also prevent power theft.
Has the Planning Commission done anything in terms of cutting down on the state's allocation because their electricity boards have not paid their dues?
No. Some of the state boards owe Rs 5,000- 6,000 crores to agencies such as the National Thermal Power Corporation and Coal India Ltd. This amount has been adjusted out of the plan assistance to these states, for about 3 years, in annual instalments.
But is that a feasible mechanism for the future, especially in terms of enforcing counter-guarantees given to the foreign investors?
No. There is oppo'sition to that because if the plan assistance is cut, the entire state is penalised. The cut could fall on education, health or maintenance. Why should they suffer? It is a regressive method. It does not ask the consumer to pay, but imposes a burden on planned expenditure in the social sector. The SEBS give away free power, allow theft, and as the arrears accumulate, they are unable to generate the cash flow to pay for their supply. The solution is to create autonomous boards, reduce political interference and allow them to enforce rational tariffs.
There is no estimate of how much of the power goes to the big farmers and how much to the smaller ones. Most of the pumpsets are used for irrigating the larger farms, and about 50 per cent of the subsidised power goes to them. So, even the agricultural tariff can be graduated with reference to land holding sizes.
With the entry of largescale private investment in the energy sector, do you see a change in the role of the Planning Commission in suggesting projects and whetting investments?
The SEBS will have to buy power from the generating companies, and the latter have to go to the SEBS for some of the infrastructure and fuel linkages. The Planning Commission has come into the picture because of the electricity boards' programme and the total pattern of demand and supply of power in the regions. This is really not an important function, as nobody would invest unless there is a buyer and nobody would buy unless there is a demand. Even the Central Electricity Authority's (CEA) role appears to be unnecessary. I don't see why the CEA should look at private projects, where the investor,makes his own investment and the SEB buys power on a competitive basis. When the SEBs are entering into a contract, I don't see why the CEA should look at the capital costs.
Would you also say that the role of the Planning Commission is diminishing in that sense? If so, what should it become?
Keeping statistical information on regional power distribution and suggesting ways. in, which they can economise on that by buying, power competitively. It can take on the major consumers or make the agricultural power supply differentiate between the large and small':farmers, and look at the financial performance4 of the SEBS, because we have to make a plane allocation. It seems very difficult because they finances of the states are in pretty bad shape, Where there is a private party willing to set up' on a competitive basis, and the SEB is prepared to buy, then I don't see why we should have a buyer's scrutiny.
The Planning Commission had been suggesting energy conservation measures which are sharper than the enabling legislation that is currently being drafted by the ministry of power, which relies mainly on incentives. What is the Planning Commission's stand on this?
We have given a blueprint for an Energy Conservation Act. We have said that the ECA would involve the setting up of an Energy Conservation Authority, which should have 2 or 3 fulltime members. They should have access to technical assessors and advisors, and have the right under the law to have a panel of energy auditors and nominate them to undertake energy audits in particular sectors of industry. Normative energy consumption and efficiency standards should be set. These norms should be specific to the industry segments. The Authority should have the right to levy penalties for wasteful energy use. This body would be independent, autonomous and answerable to the Parliament.
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