Power Sector Reforms – A Recipe For Disaster

WITH the adoption of new economic policy of liberalisation, privatisation and globalisation, the state has virtually abandoned its main responsibility towards the people. The government no larger feels committed to work for their welfare. In the new policy framework private companies, MNCs and other business organisations are expected to perform this task. However these business enterprises guided entirely by the profit motive are least concerned about the well-being of the people. This explains why in the liberalisation phase both poverty and unemployment have increased and the basic amenities, including education, health services, water supply, availability of electricity and PDS have deteriorated.


Presently in India about half of the population is poor. In the agricultural sector, the income of around eight crore peasant housholds is below Rs 8,000 per annum at current prices. There is also inequity in the utilisation of resources. While six per cent of the population which is relatively well off, uses around 60 per cent of the resources available in the country, 80 per cent of the population with low income has to remain content with less than 20 per cent of the resources. The liberalisation measures of the nineties have also contributed to the plight of the people. In this period a large number of factories have been closed and number of such factories has risen from 2 lakh to 7 lakh. During the last four years the percentage of workers in regular service has declined, while that of daily wage workers increased. In this overall appalling condition of the common people, liberalisation measures in the power sector would inflict further sufferings on them.


Over the past five decades the power sector has registered spectacular growth as a result of the initiative of the state. As against 1.7 thousand MW installed plant capacity in 1950-51, the public utilities presently have more than one lakh MW installed plant capacity. This has enabled more than twenty fold increase in per capita consumption of electricity. In recent years, supply of power, to household sector has increased at the rate of 10.3 per cent per annum, to agriculture at the rate of 15.2 per cent and to industry at the rate of 9.1 per cent. Since independence five lakh villages which are 80 per cent of the registered villages, have been electrified. Moreover, about 4.5 crore or one third of the Indian homes are now electrified, 90 lakh farmers get subsidised electricity for tubewells and about 20 lakh small scale industrial units are power operated. This all could be possible because of the societal concern of the public sector in developing the power sector and making supply of electricity available even to relatively disadvantaged sections of the society.

At present electricity is one of the main sources of energy which affects day to day life of man. It directly and indirectly generates sizeable employment and is responsible for the overall development of the economy. Because of the overbearing role of electricity in the development of the society, control over the power sector has assumed so much importance that it determines to a great extent as to who will have the leverge of political power.

So far power has been developed largely by the states; of course the centre has provided necessary support to the former. The power tariff has been usually affordable due to societal concern of the public sector. However, over the years regional imbalances have developed which must be removed in future. In the regions plagued by power shortage continuous supply of power with proper voltage is to be provided.

The proponents of economic reforms in the power sector attribute the existing malaise in this sector to the working of the public sector. They raise their finger at the heavy losses of state electricity boards which they affirm are due to the lower productivity of the workers and rampant corruption at the managerial level. Under these circumstances, they argue the public sector cannot cope with the rapidly growing demand for electricity. For further capacity creation huge funds are required which can be provided only by the private sector, including the MNCs.


These liberalisers however with blinkers on their eyes cannot see the serious implications of involving private companies in the power sector. Now the Enron fiasco is too well known and does not require repetition here. It is now well established that the MNCs with their high costs impose heavy burden on the consumers. By raising power tariff steeply they create conditions whereby most of the domestic consumers find it impossible to use electricity. Under the so-called reform measures in the power sector, electricity subsidy to the farmers would be drastically cut which will surely lead to their ruination of the farmers. Small scale industries already facing stiff competion from the imported products are finding it difficult to lower their costs as they are made to buy power at higher costs. Under the circumstances unable to withstand foreign competition a larger number of factories have already closed down. Hence, the policy of handing over the power sector to the Indian private companies and the foreign MNCs is a recipe for disaster.