Electric power is the bane of India: politicians of all colours use to to bribe voters and make money; as a result, power is expensive and unreliable - a major reason for India's uncompetitiveness. Suresh Prabhu was one of BJP's more rational and honest ministers; no wonder he left before he could make a difference. This column was published in Business Standard of 27 March 2001.
DO NOT MAKE WEAK MOVES
Suresh Prabhu looks incongruous in the company he keeps. He wears a shirt and trousers; no billowing dhotis, no technicolour drapes, no floppy sandals, no orange waistcoats, no swanky turbans for him. The only telltale sign that betrays his provenance is an occasional, carelessly smeared-on red dot. He is also much younger than his venerable colleagues; in our gerontocracy, he and Omar Abdullah look as strange as Sushma Swaraj would in a fashion parade.
He is a Shiv Sainik. That is the party of the
foul-tongued Bal Thackeray, the rowdy party that within five years managed to
wreck the finances of Maharashtra, India’s richest state – something it could
not have done altruistically. So it is quite a surprise to meet Prabhu trying
to lay down the law to unruly state governments.
The ministry that he heads has been the seat of some
of the most blatant corruption. For the modus operandi, read the Jain diaries;
they allege equipment suppliers giving fat commissions to power ministers and
bureaucrats. And although we cannot be sure just why he wanted to do so,
Prabhu’s immediate predecessor, Rangarajan Kumaramangalam, wanted to give out
orders for power plants on a scale never before dreamt of. So if Prabhu were to
follow tradition, he would be able to wreck the power PSUs as decisively as his
party did Maharashtra government.
But instead, Prabhu has taken on the mantle of a
reformer. He says that the state electricity boards are bankrupt, and he wants
to restore their financial health. According to him, distribution is the key.
The SEBs must meter all connections, and begin to charge all consumers. Next,
they must begin to earn enough to meet their obligations. To this end, he is
trying to make state governments sign memoranda of understanding with his
ministry.
To add to his clout, he got the finance minister to
say in his budget speech that he was prepared to make a “one-time settlement”
of the SEBs’ dues to central government undertakings – what they owe for the
power and coal they have taken – provided they reformed themselves. In other
words, he dangled a carrot before the state governments: if they began to
collect enough from power consumers to meet their current payments, the central
government would write off some of their dues.
Prabhu went further and got the Prime Minister to
address assembled state power ministers on 3 March and deliver the same
message: start paying for the coal and power you are taking.
What was the calculation behind these high-profile
messages? Presumably Prabhu thinks that while the state ministers may not have
sufficient respect for his youthful self, they may be daunted by the finance
minister who carries financial clout, and embarrassed by the Prime Minister
whom some venerate.
But as he walked out after hearing the Prime
Minister, Rajnath Singh immediately called the bluff: he said he would not
start charging farmers because “they could not pay”. In other words, he was
saying, do your worst; I will continue to draw the central producers’ power
free, and just you try to stop me.
How could Rajnath Singh be so openly insolent?
Because the Prime Minister has made him chief minister of Uttar Pradesh with a
one-line brief: he has to win the next assembly election. Lucknow, the Prime
Minister’s constituency, is the capital of Uttar Pradesh; the Prime Minister
has all his eggs in Rajnath Singh’s basket.
So does Prabhu have a chance? Not really. Five
states have signed MOUs with him, but those MOUs will go the same way as the
hundreds of MOUs the central government used to sign with public enterprises.
When the time comes, state power ministers will find a hundred reasons for
reneging on their commitments. They will do exactly what Rajnath Singh will do,
only less brazenly. Some would say less honestly.
Not only have Prabhu’s plans been torpedoed by his
political ally even before they could be put in place, they are not even worth
pursuing. Prabhu envisages a sequence in which the SEBs would first instal
meters for every consumer, then start charging farmers a nominal price, then
over the years, raise it so as to make power production viable. Just because
there is a meter outside his door, a consumer does not have to pay. If he is a
farmer, he can collect his friends and block roads or railway lines; if he is a
townsman, he will bribe a linesman to doctor the meter.
To which Prabhu has an answer: the meters will be
not be at the final destination – the doorstep – but at the origin – in the
power station or the at the step-down transformer. But the problem lies not in
the lack of technology but in the lack of will. For the same reason as Rajnath
Singh, the owners of SEBs do not want to collect the correct price from a
farmer or a domestic consumer. And as to Yashwant Sinha’s carrot, that the
SEBs’ debts to power PSUs will be written off, every chief minister knows that
Sinha is offering a carrot because he does not have a stick.
So why are the heavyweights like the PM and the
finance minister making such a noise? Because Vilasrao Deshmukh has opened
their eyes. If a state government does not pay its dues to a foreigner, the
central government will have to pay them. It is already paying for Enron on
account of Maharashtra government’s fecklessness. Every “reforming” state
government is borrowing billions from the World Bank for its power reforms;
when the reforms fail, the central government will have to pay the bill.
Does the centre have an option? I have three to
offer. First, pass a central act abolishing the monopoly of the state
electricity boards, and saying clearly that anyone can sell power to anyone
else. This is the minimum; it will be enough to let the horribly exploited
industrial customers escape from the SEBs’ clutches, sell power to one another
and set up economic plants. In states that have separated transmission from
generation, it can also be decreed that the transmission corporation will be a
common carrier: that it will carry power from anyone to anyone else at a
common, non-discriminatory tariff.
Second, abandon the central power plants and coal
mines as so much junk. Tell the state governments in which they are located
that they can do whatever they like with them. In other words, they can close
them down and create power shortages all over the country, or begin to run them
at a profit.
Third, impose a tax on all power sold by the SEBs
equal to the marginal cost of power – probably about Rs 2 a unit – and put the
revenue into a fund which will be given to the states that abolish
discriminatory and below-cost pricing of electricity.
I sympathize with Prabhu’s good intentions and
appreciate his desire to do something. But I would give him the advice I used
to get from a Japanese friend who beat me all the time in Go: don’t make weak
moves.
