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The price of idiocy

Jaswant Singh was the Union Finance Minister in Atal Bihari Vajpayee's thirteen-day administration in May 1996. Going through the files, he came across a horrifying statistic which gave the lie to all of Narasimha Rao and Manmohan Singh's talk about economic reform: in the years from 1991 to 1996 not a single additional megawatt (MW) of power had been generated in India!

Jaswant Singh mentioned this in the debate during the vote of confidence that brought down the first Vajpayee ministry. Nobody contradicted him, but nobody saw fit to discuss the implications either. After all, the Third Front needed Congress support, and it suited them to talk of 'communalism' rather than governance.

But there is a price to be paid for such idiocy. Unfortunately, it is not the windy leaders of the erstwhile United Front and the Congress party who are paying it, but the millions of Indians who still live in the villages. I know that city-dwellers complain of power-cuts, but believe me the situation is nowhere near as bad as it is in the countryside.

Going strictly by official figures, there are 81,600 villages in India that go without electricity. Think about what such a loss entails: everything from computers to water purification plants is utterly useless in these benighted areas.

The governments in many states appear to be in no hurry to amend matters. Let me give you a few examples, beginning with Jyoti Basu's West Bengal. Though his government often boasted of alleviating the power situation in Calcutta, it did little for the rural areas. At the current rate of electrification, it will take no less than 71 years for the process to be completed! (By the way, I suspect the 'improvement' in Calcutta is because of industries moving out of the state!)

One must admit that West Bengal is far better than neighbouring Bihar. In Laloo Prasad Yadav's fiefdom, the situation is so bad that it will take 702 years before the hamlets in Bihar enjoy the benefits of electricity. No, that is not a misprint -- it will take over seven centuries!

Rather surprisingly, both Uttar Pradesh and Orissa -- traditionally described as 'backward' states -- are better off than 'progressive' West Bengal. It will take 'only' 26 years for Uttar Pradesh to be able to deliver electricity to all its villages; Orissa shall take 19. Those are not very happy statistics, but they are better than anything that Jyoti Basu could manage in 23 years of ruling West Bengal.

Sadly, the situation is likely to become worse rather than better. It has been estimated that all the state electricity boards put together shall add 4,000 MW between now and 2012. The private sector can add 10,000 MW. The Union government projects in the pipeline could amount to 40,000 MW. (All these, please remember, are the best case scenarios.) The three put together add up to 54,000 MW.

Here is the nub of the dilemma: according to the sixteenth electric power survey, the actual new capacity requirement is 100,000 MW. Thus, even assuming that everything goes as contemplated, there is a shortfall of 46,000 MW. The EPS grimly concludes that shortages across the board will rise from 6 per cent to 18 per cent. In peak hours of consumption the shortfall shall rise from 11 per cent to 24 per cent.

On January 2, 2000, the entire grid in North India collapsed. It has been estimated that this resulted in a loss of Rs 500 crore. What will happen if this happens for days, perhaps weeks, on end? That figure of 24 per cent means that industrialists had better start preparing for the worst...

As usual, the root of the problem is politics. In every state, populist politicians promise free power (or at any rate uneconomical rates). The state electricity boards then find that they cannot collect even the niggardly amounts due to them. I shall not even mention the losses due to theft! This soon becomes a downward spiral.

The SEBs cannot build new plants because they do not have the money. (Outlay on the power sector fell from 31.55 per cent in 1990-1991 to 18.5 per cent in 1998-1999.) They cannot buy power from private producers because of the same reason. Investors, whether Indian or otherwise, are reluctant to offer loans to the private sector because there is no guarantee that they can recover the money. This means that everyone is left looking to Delhi for a counter-guarantee, but the Government of India is not exactly flush with funds!

To digress a bit, permit me to speculate a little on the outcome of the Enron controversy. Maharashtra says it lacks the funds to pay up, and the American firm has invoked its counter-guarantee. The Union power minister has already said that the Government of India shall stand by its word, which means that Enron shall be paid for the 800 MW generated in the first phase.

But I think that Enron will renegotiate the sale of the 1,400 MW to be generated in the second phase. It is also possible that the price shall fall when the cost of natural gas (the fuel of choice) shall come down.

What will it take for other private producers to enter the field? Will every single one of them have to be given a counter-guarantee? And if we do not do so, where is the extra power to come from?

Let us face it: there is no way out unless the SEBs are put on a sound commercial footing. That means ending all those useless subsidies which politicians love to dole out. After all, what is the point of a subsidy if there is no electricity being generated at all?

Politicians, we know, win votes to gain power. But the reverse is also true: to win votes they need to ensure that the voters get power at home.

T V R Shenoy