Not amenable to market pricing

In the final analysis, we must face the fact that access to affordable electricity is as much a political issue as an economic one. Electricity is not - and cannot be treated as - a commodity amenable to market pricing principles. Fancy economic theories that require every consumer to pay what it costs to serve him or her will flounder, on account of their inherent inequity, when applied to electricity supply.
In a network - supplied system, as in the case of electricity, cost of supply is necesarily skewed in favour of the big consumers availing high tension supply. Supplying small consumers will necessarily cost more thanks to the series of step - down transformers and long lines to take the power to far-flung rural areas. Strictly following cost-to-supply economic pricing of electricity would lead to perverse out comes - such as the steepest  tariffs for rural consumers with the least capacity to pay and low  tariffs for high- tension consumers competition is impossible to achieve in electricity supply.
Cross-subsidies in power tariffs are not only inevitable but indeed desirable. What we need to focus on is targeting of cross-subsidies to the deserving consumers. Electricity can at once satisfy both needs and wants. It would be useful to focus on the definition of such needs and wants. For instance, minimum lighting - one or two bulbs in all homes - regardless of capacity to pay, minimum power required to pump up water to urban high-rise residential blocks, sufficient power to operate irrigatian pump-sets in unirrigated areas, minimum power supply for street-lights, hospitals and schools, and to employment-intensive industries could for instance, be categorised as those deserving cross-susidy. Such categarisation could be adopted after extensive public debate. Electricity used for other purposes can be priced at economic cost.
Instead of seizing the bull by  the horns and tackling it head-on, the Government proposes to sacrifice incumbent regulators who are trying thier best to balance conflicting objectives thrust on them by the Electricity Act - such as reducing cross-subsidies even as they are required to ensure availability of power at affordable prices.
There is certainly a case for making the selection process more transparent and the eligibility criteria for regulatory jobs more focussed, but this can be done within the existing regulatory framework. Future selections can be based on more rigorous procedures.
Revamping existing regulators through forced en masse resignations will weaken the institution, sap regulators’ morale, and erode their credibility. Worse, installing private sector friendly regulators - as the proposal seems to suggest - could turn out to be a remedy worse than the malady itself.  
The Hindu, Oct-5-2005