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LATEST NEWS UPDATES | Dirty secret of India’s political economy

Dirty secret of India’s political economy

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published Published on Mar 1, 2011   modified Modified on Mar 1, 2011
The Economic Survey tucks away a little, dirty secret of India’s political economy in a box on power sector reform. The losses of state electricity boards, says the Survey, are now about 1% of GDP, which would translate to about Rs 78,700 crore this year. The government stopped publishing a table on this vital parameter a couple of years ago but the problem has only continued to grow in shade of secrecy. This problem cannot be fixed by the technical fixes endorsed by the Survey: independent regulation, competition in bulk supply along with distribution reform and upward revision of retail tariffs. The problem is not with the power sector understood as electricity.

Rather, the problem lies with power, as in politics. Patronage of power theft is still widely perceived as legitimate politics, leaving 35% of all power generated unpaid for. A few states like Gujarat and West Bengal have taken explicit political decisions to stamp out power theft and have reaped rich dividends. Others, including a Congress-ruled state like Delhi, drag their feet in the matter. Political courage has to be found not just to increase tariffs where required, but also to end patronage of all theft of power. Often, industrial units steal power not so much because they cannot pay for it as because they do not want to start off an audit trail that could lead to demands for excise duty payments on whatever is produced using the power consumed, and for tax, subsequently, on the income generated from such production .

This makes patronage of power theft subversion not just of the power sector, but of governance in general. The other challenge for the power sector arising from politics is a paucity of coal, even for pit-head plants. Nationalisation of coal is an idea whose time went off into the sunset a long while ago, but lives on to haunt the power sector through avoidable shortage of coal. The power sector needs yet more political action, in the form of an amendment to the Electricity Act 2003 to create a mechanism to hold state level regulators to account for their errors of omission and commission. At present, if a regulator takes arbitrary decisions that damage power sector reform , there is virtually no redress. 

The Economic Times, 28 February, 2011, http://economictimes.indiatimes.com/opinion/editorial/dirty-secret-of-indias-political-economy/articleshow/7591554.cms


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