Some encouraging signs have been visible recently of the power ministry taking steps towards creating a market for the besieged power sector. It was reported that sectoral and firm-level caps on borrowing for financial closure of power projects were to be relaxed.

Financing is still largely from public sector financial institutions and large infrastructure programmes simply cannot be funded by mechanical financial rules — especially in a sector like power, where each project is a Goliath. Also there is to be rethinking, reportedly, on both “allocation” rules and pricing for inter-regional transmission of power. The sooner we realise that the energy problem will resolve itself if we firmly follow the rules laid down in the Electricity Act, which provides the structure for both a market for investment in power and a market for sale and purchase of electricity, the better off we will be. Politics is blamed. No. Technical weaknesses and an inability to operationalise the reforms are to blame.

First, a market for electricity, in terms of distribution and transmission reform, is not born of splitting the electricity boards and then sitting back and watching the fun. The Electricity Act actually lays the ground rules for rule-based open access across grids, but it has just not been given a chance. I remember that the first big transmission of electricity across grids, which was when I was minister; the CM of Andhra Pradesh called me up to complain that the power coming to him, from plants working at very low levels of capacity, was billed at Rs 7 a unit. On checking, we found that the fixed cost of a unit producing little power had been added — a terrible rule to follow, from any welfare angle. It was implementation that was the problem.

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