India resolved to revamp the power sector with a series of reform measures
ranging from allowing private participation in the power sector to
restructuring and privatization of the SEBs. This study critically reviews
the reform measures initiated in the Indian power sector during the past
one decade with the objective of evaluating its outcome. An evaluation
of the achievements of various reform measures reveals that except in a
few cases like improvement in Plant Load Factor (PLF) the old problems
still persist and the states are finding it difficult to enforce the reforms.
The parameters used to assess the achievement of reforms include (i) the
extent of participation by private sector in power development, (ii) the
achievements of regulatory commissions, and (iii) the progress and
achievement of reforms and restructuring of the SEBs. The data for the
analysis are collected from secondary sources.
Electricity plays a major role in a country’s economic development and it is an input
in the production of almost all other goods and services besides being an important final
product consumed by households. Its role has enlarged after the economic liberalization
policy initiated by the Government of India in the 1990s. The Central government opened
up the economy to render Indian firms globally competitive, eased the barriers of entry
and provided an impetus to exports. The leap into the new economy would remain an
empty rhetoric unless the economy is in a position to supply adequate power to meet
the emerging needs. Even though the Central government had realized this situation, the
vertically-integrated, public sector-owned Indian power sector was not in a position to
meet the growing demand, mainly due to its poor financial position. The demand-supply
gap had widened and, in order to curtail the gap, there was need for a huge investment,
which was beyond the capacity of the government exchequer. This not only led to underutilization
of existing productive capacity of industries but also acted as a constraint
to its productive efficiency and output growth. Moreover, large users like heavy industrieswere forced to invest in alternative sources such as captive plants, which were not
economically efficient, thereby increasing the production costs. This had ripple effects,
creating bottlenecks and slack capacity utilization in other sectors of the economy.
The critics of public sector ownership argued that public ownership had led to
inefficiencies and scope for undue political influence. According to them, public sector
units are typically known to have people related problems like excess staff, poor
productivity and motivation, rigid compensation structures and arbitrary recruitment
policies along with other physical and technical problems. This peculiar characteristic
of the public sector is mainly due to its welfare objective rather than profit orientation.
Moreover, the conflicting roles of government as owner, provider and rule-maker had led
to mismanagement and poor performance, deepening the suspicion that government alone
cannot be part of the solution (Dubash and Sudhir, 2001). |
