Against The Current: Voll-III (Electricity Act and Technical Choices for the Power Sector in India)

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The State Electricity Boards (SEB) present huge potential for daily change in the lives of a billion-strong Indian population. Often described as nearly impossible to reform, SEBs offer huge untapped potential for higher technological efficiency, that in turn could mean reliable electricity for day-to-day life, reduced bills for the users and the public exchequer, higher environmental sustainability.

For this potential to appear clearly in the public debate, the so-called `technicalities' of the power sector should no longer be the monopoly of a few specialists and technocrats. And indeed, India's history of economic regulation has entered into a new era when, in the power sector, the model of 'independent regulation' for utilities got enacted through the Electricity Regulatory Commissions Act, 1998, then followed by the new Electricity Act 2003. The regulatory commissions gained a saying in virtually all technical matters within the utilities. The biggest chasse gardee of the SEBs engineers had not resisted.

This volume comes as third in a series on the power sector reforms in India. The series attempts at understanding (i) the organizational tasks, (ii) the tariffs aspects, (iii) the role of the private, (iv) the role of technology in the complex, variegated, state-specific Indian scenario.

A clear and sound public debate on tariffs, service, advantages, and limits of privatization in the Indian scenario can only come from an informed assessment of current margins in technological enhancement of SEBs and on the relevance of the Act in framing such a new Indian power system. This volume wishes to contribute to this debate.

Prem K. Kalra is Professor at the Indian Institute of Technology, Kanpur. His areas of interest are Power Systems, Expert Systems Applications, HVDC Transmission, Fuzzy Logic and Neural Networks Applications. He is coordinating the India Infrastructure Reports 2006.

Joel Ruet is Marie Curie Research Fellow at the London School of Economics and Associate Researcher, CERNA, Ecole des Mines, Paris. He has been head economist and acting director with the Centre de Sciences Humaines, New Delhi. He has specialized in the study of economic reforms of the Infrastructure and Urban Sectors in India.

Prem K. Kalra And Joel Ruet

India's history of economic regulation entered a new era when, in the power sector, the model of 'independent regulation' for utilities got enacted through the Electricity Regulatory Commissions Act, 1998, then followed by the new Electricty Act 2003. These Acts were instrumental in making India engage with a new political economy of reporting, tariff setting, economic and technical regulations, moving away from the old system of administered economy, by bringing in another set of players: the civil society, and soon the private actors. However, in parallel to this with patient, decade-long, efforts to frame and implement these two Acts, a series of other reforms went ahead: a few property reforms (privatization), structural reforms (some forms of unbundling that were to be noticed before 2003), and many 'project-based' reforms (like the Accelerated Power Distribution Reform Programme). Even though several reformers would obviously see the continuum and even more the intrinsic unity of these series of reforms—the World Bank even developing a particular 'package' of these for the States of Andhra Pradesh, Haryana, Orissa—most would long to see or wish to see these reforms in their isolation.

Typically, utilities would focus on the project-based or project-related aspects of reforms. Signing for larger reforms in the long run was, as often, a desperate move to keep accessing means for new engineer-oriented projects in the short run. For quite some time, the slow implementation of a regulatory process would be for most of the utilities at best an incidental feature of a new way to bargain for resources with the bureaucracy, at worst a distant impediment that would always be sorted out with the help of the bureaucracy. However, after a period of five years of this observationist regime (during which the regulators themselves forged their own regulatory capacities and learning), the 2003 Act got passed. Along with it, was the compulsion to provide for rules and regulations to facilitate open access to the network for external players. Along with this, the real impact of the regulatory process were soon to be felt. Especially, the regulatory need for tariff fixation would lead to a better knowledge on costs, that would in turn necessitate a real reporting on operational factors and on cost assessment of techniques and technology.