Important as the above issues are for social and political implications of the power sector reforms, they can be decoupled form another set of issues. These are related to the unbundling of the vertically integrated monopolies that have been the norm in the electricity sector all over the world till the mid 80's. The reforms-in Chile under Pionchet and in UK under Thatcher- were to separate generation, transmission and distribution and spin them off as independent companies. The premise was that it would lead to competition amongst generators and bring down the price of electricity. It was with this end in views that California introduced large-scale changes in 1996 and dismembered its vertically integrated power utilities.Major reforms are underway in the world with the UK and now the California reforms as the model. However, the recent crisis of the electricity sector in California and the lack of success of the reforms in UK underline that these reforms are being undertaken with little evidence to show that there is a realistic basis for believing that the consumer, particularly the small consumer, benefits in anyway from such competition. Even worse,if these reforms fail, as it did in California, it is the smaller consumer who bears the brunt of the failure.

Another Feature of the proposed Bill is taking away the power of techno-economic clearance from CEA. Currently, any project above a certain size needs this clearance. One of the crucial issues in the Enron case was that CEA did not give it a techno-economic clearance but had given it only a technical clearance. It had stated in its technical clearance was obtained for the project. The implication of CEA's lack of techno economic clearance that as the Finance Ministry had given Enron a financial clearance, presumably CEA did not need to examine the economic aspects of the project. This was one of the items challenged in the Court that under the Law. CEA cannot abdicate this responsibility and therefore no valid techno-economic clearance was obtained for the project. The implication of CEA's lack of techno-economic clearance must now be clear to all, CEA was well aware that Enron was a project with inflated capital cost but chose to sidestep it due to the political partronage that Enron obviously enjoyed. By removing CEA's right to examine the capital costs of any major project, the Government wants to ensure that there are no hindrances to gold plating power projects and then claiming the need for higher tariffs.This is not an idle speculation. In the Hirma project, the Central Electricity Regulatory Commission compared the capital cost only with other fast-track projects such as Enron thus ensuring that the high capital cost of Hirma was not questioned. Thus, the Central Government, through this Bill, wants to ensure that any serious scrutiny of private power projects do not take place.

It may appear that the provision of captive generation in the Bill is quite innocuous; it allows industry to set up captive generation anywhere and without any restrictions. The issue here is that industry is the one class of consumer that provides cross subsidy to others. If industry is allowed to move away from the grid, then the grid will only have agriculture and domestic consumers. Under these conditions the Government subsidy to agriculture and low-end diametric consumers who will require support will only grow. One of the reasons for the current crisis of the SEBs is the industrial consumers are deserting the grid. The Bill is aimed at accentuating this flight instead of containing it.

The current power policies being followed in the country have been able to address neither the problems shortages of supply in various parts of the country nor provide power to the people at affordable rats. The last one-decide has seen the average rate of power rise from Rs.1.00 to Rs. 2.50; the tariff to industry at Rs. 5.00 is already one of the highest in the world. The Central Government is starving resources to the states and forcing State Electricity Board (SEBs) to introduce private power at very high prices. Consequently, the financial crisis of the SEBs has increased even more in the last 10 years.

The objectives that the power sector had served before the reform period are as follows.

To expand electricity sector at least cost and provide power at affordable rates to the people.

To expand rural electrification and provide power cheaply to agriculture, thus safeguarding the food security of the nation.

To provide industry power at rates that they are globally competitive To provide access to power for economically disadvantaged sections and backward areas

Build self-reliance in not only design, construction and commissioning of power plants and systems but also in manufacture of plant and equipment for the power sector.

All these objectives are valid today and indeed must form the bedrock of any policy for the power sector. It is in the light of these objectives that we have to examine the success or failure of the current policy for the sector.

The last decade has seen a sharp reduction in the resources provided in the Five-year Plans. The investments in the Power Sector used to be 19-20% of the total plan allocation in the 70's and 80's and have now come down to about 16% in the 90's. The budgetary allocation has dropped and was only about Rs. 3000 crore last year, the rest being met by borrowings of power Public Sector Undertakings. As a result, while we could add more than 20,000 MW in the 7th Plan. the capacity addition in the 8th Plan was only 17,000 MW and is likely to be less than 20,000 MW in the 9th Plan.