The Power of None

The Dabhol drama took an unexpected twist recently after renegotiating committee chairman Madhav Godbole first stepped down and then resumed his responsibilities on the same day. TERI's Director-General R K Pachauri, a member of the Godbole Committee, added fuel to the fire by publicly stating that Mr Godbole should not participate in the negotiations with Enron. In an interview with Vikas Singh, Dr Pachauri explains his stance on the Enron controversy and the problems with India's power sector as a whole. Excerpts: Is the Dabhol power purchase agreement, as it presently stands, a good deal for India? The agreement, as it stands, is NOT a good deal for India. It needs to be renegotiated and changed substantially to make it acceptable for the government of Maharashtra, the Government of India and, of course, the people of India. The lines along which the renegotiation should be carried out are detailed in the report of our committee (the Godbole Committee had recommended that the Dabhol Power Company project be restructured to bring down the cost of power, the equity return for the redefined DPC tariff be defined in rupee terms rather than in dollars, and DPC be allowed to sell power to other parties besides the Maharashtra State Electricity Board. It had also suggested that the renegotiated tariff be benchmarked to the lowest cost of supply of power from gas-based projects elsewhere, and also to the willingness of other buyers to pay for the power.) You have dissociated yourself from the renegotiations with DPC, and recently suggested that Mr Godbole should do the same. What is your reason for doing so? I have dissociated myself because, firstly, I just cannot spare the time. Besides, it is the Maharashtra government and the MSEB who should carry out the renegotiations, and not any committee, even if it carries their mandate. The authors of the first report would have entrenched positions as stated in the report. How and to what extent can they change their positions? That this is a likely problem is proved by what Mr Godbole said last week in these very columns. He is still advocating the minority view of the committee in favour of a judicial enquiry. Do we really expect Mr Godbole to give even an inch in the negotiations? You cannot arrive at a settlement without some give and take, which, of course, must be based on careful pre-planning. In case negotiations fail, what are the damage control steps India should take? If the negotiations fail, and in fact in anticipation of that happening, the MSEB should take all the steps required to strengthen their own legal position. They are already doing so, by raising several counter-claims against Dabhol and other legal steps. Looking at the power sector as a whole, how does one reconcile reports that India has adequate production capabilities with the reality of hours of load-shedding and power cuts every day? Our pricing of power is totally distorted. For instance, subsidies for agricultural consumers force the SEBs to charge high tariffs from industrial and other consumers, who often prefer to set up their own captive units.Nobody has an accurate estimate of captive capacity in the country, but it could be about 20,000 megawatt.There are also imbalances in generation, with inadequate peak load capacity such as hydro or gas-fired turbine units. We are adding to base load capacity with very little increments in peak load supply potential. Would the proposed national grid help? A national grid is being developed and is likely to become a reality. But we have to get out of the notion that inter-state transfer of power has to be controlled by the Central government. If the SEBs or their successor organisations were to develop a commercial culture, power trading across states would become purely a business decision. There is no reason, for instance, why the states of northern India would not get into an arrangement to buy power from the Northeast. I am not in favour of an organisation like the Power Trading Corporation. It can only hinder and not help commercial trade in power between the state utilities themselves. There is a public perception that all the fast-track projects were gold-plated? If not gold-plated, they were at least silver-plated. Our process of evaluation of projects and invitation of bids was wrong. We also did not set up appropriate capabilities for analysis of projects in a professional manner. In some cases, governments were wise enough to seek outside help. The Karnataka government, for instance, approached Teri to evaluate the original Cogentrix bid, and we were able to bring about a substantial reduction in cost by re-configuring the plant and suggesting some technology upgradation. Both parties accepted the revisions we suggested. If you were asked to prepare a blueprint for power sector reforms, what would you advocate? We must urgently establish independent regulation of power in all the states. But the manner in which we are going about this has growing weaknesses. In most states, these organisations are becoming bureaucratic extensions of the government itself. Nor have they acquired adequate professional expertise or strength. This whole area needs urgent attention. The second major step involves privatisation of distribution. We cannot make the power sector financially viable unless distribution and collection of revenues move into the private sector. Several other steps need to be taken, particularly for power supply in rural areas, involving the building of local capacity for decentralised generation and supply. Do you have any ballpark figure for the losses the economy suffers because of inadequate availability of power? We are saddled with the most capital-intensive power sector in the world. Just count the investments in voltage stabilisers, the UPS systems, the captive generating units and inverters, not to speak of underutilised and badly maintained SEB assets. The Indian public is the victim of a large fraud, which no one in the country seems really bothered about. Per unit of power not supplied to industry or other productive activities, we lose output anywhere between Rs 15 to Rs 25. In the aggregate, therefore, it would not be wrong to state that if we had good-quality and adequate power, we would be able to add at least 2 to 2.5 per cent to the growth of GDP annually (according to the Economic Survey, India's gross domestic product in 2000-01 at 1993-94 prices was about Rs 1,221,000 crore. A loss of 2.5 per cent on this figure works out to around Rs 30,000 crore). Without a healthy power sector, we can forget about attaining growth rates of above 6.0 per cent on a sustained basis. There is a huge opportunity cost associated with the mess in the power supply industry and we are paying very heavily for it.