Privatisation

The Narendra Modi government appears to have decided to privatise public sector banks (PSBs). Preparations are underway with arguments being marshalled that “there is no alternative” to privatisation.

The extremely liberal regime ushered in by the Electricity Act 2003 allowed a few existingprivate captive thermal generators to make handsome profits, particularly in certain regions with perceived advantages in terms of availability of coal and water. But the majority of proposed projects were abandoned without cost to the communities of the area they were to be located in. Of the rest, only a few are operational with partial capacity, while others are under construction with delayed schedules or have gone into limbo. A critical analysis of the development of private thermal power projects over a decade.

Giving so many financial sops and deferment of due payments to the state-owned telecom companies which have inherited assets and assured markets while their competitor private telephone companies have to raise equity and debt capital and have fragmented licences, territory- and service-wise, is inequitous.

No Easy Answers Against the Current: Organisational Restructuring of State Electricity Boards edited by Joel Ruet; Manohar Publishers and Distributors, New Delhi, 2003; pp 224, Rs 500.

The success of electricity reforms in India will depend critically upon the existence of some sort of restraining or disciplining mechanism in the sector, in the absence of which current efforts will likely result in a transition from inefficient public ownership to profit-gouging monopolies or oligarchies. In principle, such a mechanism could be strong, independent and effective regulatory oversight over public or private monopolies or significant competition among a large number of public and private entities. But it is important to examine without bias, and as thoroughly as possible, the feasibility and effectivness of both these sector-disciplining mechanisms before making any claims regarding the desirability of privatisation. The authors also argue that issues related to protecting the environment, extending access to the poor and other off-grid populations and strategic concerns related to import dependence and foreign private ownership need to be addressed upfront in order for the reforms to be in the broader public interest. [This paper is dedicated to the memory of Stephen R Bernow, 1942-2003.]