ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Power Sector: Bridging Theory and Practice

Power Sector: Bridging Theory and Practice Against the Current: Volume II


Power Sector: BridgingTheory and Practice

Against the Current: Volume II – Fixing Tariffs, Finance and Competition for the Power Sector in India

edited by Joel Ruet; Manohar and Centre De Sciences Humaines, New Delhi, 2005; pp 193, Rs 475.


“Potential difference” is a technical term

used in electrical engineering todenote “voltage”, which is the more commonly known term. “Potential difference”sounds more poetic to me since it indicatesthe possibility of having differences between positions. Voltage is just that. If thevoltage between two points is high, thereis a possibility of high power flow between these two points, if they are somehow connected. If the connection is not well made, sparks will fly resulting in fire,smoke and destruction. Lightning is justthat. Pardon me, if all this sounds too technical for Economic and Political Weeklyreaders but I am taking recourse to thismetaphor to highlight the wide gap thatexists between theoreticians, practitioners,theorising practitioners and practisingtheoreticians in the power sector. This gapis quite wide (with many differences) butis also full of potential, since bridging itcan produce powerful results! It is unfortunate that there are rare occasions for deriving benefits out of this potential.

Dialogues and discussions are plenty inthe power sector but are often held inwatertight compartments. Politiciansdiscuss the power sector, often taking blackand white stands (pro or anti World Bank,pro or anti multinationals, pro or antiprivatisation, pro or anti free power, proor anti-labour, etc), which easily lendthemselves to sloganeering and cultivating constituencies useful at that moment.Industry and professional forums discussthe power sector. The focus is often onlobbying, deal making or giving free reinto markets in a limited manner so as to allow large players to maximise profits but prevent the ill effects of markets (such ashigh tariff in case of shortages). Academicians discuss power. The “latest” technical developments are discussed so thatthey can be published in internationaljournals. Consumer groups rarely discusspower. When they do, the focus is limitedto individual or group grievances. Talk tosome genuine representatives from each ofthese four groups – political, industrial,academic and consumer – and it becomes clear that each one holds the other in contempt. Each considers the “other” asthe cause of problems and sees no role forthem in solutions. The “potential difference” is high. No dialogue is possible. Butsince power sector issues cannot be handledby any one of these groups, it is essentialthat bridges are built. The book underreview is one such attempt.

The editor of the book, the young Frenchresearcher Joel Ruet is not new to the Indian power sector. He has spent yearsin India and has the unique experience ofworking with the French power utilityEDF (as a research engineer working onnetwork planning and transmission pricing) in the beginning of his career. Hisdoctoral work is on management innovation to improve state electricity boards –‘Winners and Losers of the Reform of the SEBs, 2001’. The first volume with a similar title edited by him (Against theCurrent: Organisational Restructuringof State Electricity Boards, 2003) is acollection of 12 articles by authorsfrom Indian Institute of Technology (IIT)Kanpur, Indian Institutes of Management,Administrative Staff College of India, etc.Ruet’s latest book Privatising PowerCuts? Organisational Reform of StateElectricity Boards in India has been published by Academic Foundationin 2005.

The book under review has 11 selected papers based on a seminar organised at IITKanpur in late 2003. Most of the nineauthors are academics with experience inworking with power utilities, regulatorycommissions and on power policy. Thepapers address some key issues of Indianpower sector restructuring – like the agriculture subsidy, power contracts, marketoperation and distribution reforms. The book is divided into two parts. Part I,‘Tariffs and Finance’ has six papers covering availability based tariff, power supply to agriculture (two papers), transmission pricing for open access, power marketand depreciation related issues. Part II,‘Reforms and Privatisation’ has five papers covering distribution (two papers),power purchase contracts, managementcontract and concluding remarks. Theintroduction, ‘Weaving Intricate Externalities’ strings Ruet’s attempt to analyse theIndian reform process and lists the keypoints of all papers.

Issues Addressed

The paper on availability based tariff(ABT) gives a brief background on bulkpower tariff and the newly introducedABT regime. The first paper on agriculturereviews macro issues such as flat tariff, metering and subsidy. It points out thataccess to subsidy requires pump ownership and notes that a 2002 sample surveyshowed that only 5 per cent of the marginalfarmers (who constituted 43 per cent ofthe farm population) owned pump sets. Italso discusses how an un-metered supplyto agriculture has been used to fudgetransmission and distribution (T&D) lossesas well as the idea of setting up a separateorganisation for delivering power to agriculture. The second paper on agricultureis a report of a unique survey conductedin Andhra Pradesh on farmers’ willingness to pay for power. It brings out someinteresting observations: subsidy benefitsthe wealthy farmers more; wealthy farmers are willing to pay 50 per cent or morethan the existing tariff (20 paise/unit then);power consumption may reduce if supplyhours are continuous (and not in two spellseach lasting few hours). The paper ontransmission pricing for open access suggests the MW-mile method as the mostsuitable for India. The paper on financialaspects reviews the currently practisedstraight-line depreciation to show that itmakes early tariffs high and cash flowsuneven. It suggests economic depreciation as the solution. Two papers on distribution cover Andhra Pradesh (AP) andDelhi. The AP case shows how the performance of a state-owned enterpriseimproved due to the integrated efforts ofthe state, utilities and regulatory commission. Tackling the flow of electricity better, use of technology, legal and politicalsupport to reduce theft and improvingbusiness practices have contributed to this

Economic and Political Weekly May 5, 2007

improvement. Level of investment, T&Dlosses, metering, feeder outages and consumer perception of quality of service areused as indicators to measure improvement. Authors feel that privatisation (ashappened in Delhi in 2002) has a biggerpotential for improvement of the distribution segment and emphasises the roleof building information before privatising.The paper on power contracts reviews afew contracts in AP, Karnataka and Tamil Nadu. It highlights the dangers of poorlymanaged contracts and possibilities forimproving them for consumer benefit. Inanother paper, management contracts areadvocated as a good first step before theprivatisation of state-owned (distribution)utilities.


The book is quite comprehensive butaddressing a few more issues would haveadded to its credibility. Issues related tothe role of civil society groups, publicpressure on the reform process, fuel linkages, ecology aspects and equity concernsare not covered. This could mean addressing questions like: Why did ABT workwhen the planning or investment processescontinue to have much irrationality? Whywas the MW-mile method of transmission costing not adopted for open access? Howhas reform affected the poor? What is theexperience of distribution privatisation inIndia and abroad? Of course, this effort is still good, considering that papers in thisbook are from a seminar, where the organisers may have limited control on thecontents of the papers. Improved rigour insome papers would have avoided some ofthe wrong impressions that they give. Forexample, the paper on power contractsgives the wrong impression that the powerpurchase contracts were successfully renegotiated in Andhra Pradesh. Somepapers give the impression of “externalexperts” offering the best solution for thesector. Authors may be sincere in doingthis, but one feels that considering thecomplexities and multiple linkages of thesector, it is perhaps better to offer someideas and suggest processes for arriving atthe best answers.

All the papers are structured well witha background, analysis and conclusion.They address practical issues in today’spower sector and suggest measures forimprovement. Ruet’s introduction andconcluding chapter are well written. Theytalk about the various issues in powerreform and the need to have an integratedapproach to address them. Against theCurrent is indeed a first step towardsstarting a dialogue on such an approach.It takes the debate away from the usualmainstream style of running down the state sector. It provides a space for profession-but it will test your mind and intellect.”als to participate in an informed debateTesting the mind and intellect is somethingtowards improving the sector. I am re-that this book definitely does. Betweenminded of the blurb of an American theory and practice, we require many moremagazine for Against the Current, which such bridges. says, “It touches issues many are afraid totouch. You may not agree with everything, Email:


Economic and Political Weekly May 5, 2007

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