Electricity Sector Governance In India: Need for ‘Public Control’ through TAPing Shantanu Dixit Prayas, Pune, India Workshop on Electricity Governance in Asia Bangkok, December 2003

Electricity Governance - Prayas - Bangkok Dec Outline of the Presentation Examples of ‘Governance Failure’ in the Indian Electricity Sector and it’s consequences Prayas Perspective: “Public Control” through TAPing – Transparency, Accountability and, Public Participation “Public Control” through TAPing – Key institutions, Processes and Decisions

Electricity Governance - Prayas - Bangkok Dec Governance Failure In the Indian Electricity Sector: Dabhol Example ……1 Enron’s Dabhol Project (DPC) ( …..) – Large, imported liquid gas based project – Significant public criticism and opposition since inception – economic, environmental and social grounds – Project shut down since May 2001  Godbole Committee (High level ‘Energy Review Committee’) appointed by the Government

Electricity Governance - Prayas - Bangkok Dec Governance Failure In the Indian Electricity Sector : Dabhol Example ……2 Godbole Committee Report – Inappropriate project and unwanted electricity – Unnecessary linkage with supporting projects of excessive capacity – Overcharging to the tune of US $ 200 Million / year – Unaffordable – Could lead to ‘plan holiday’ (stopping all development expenditure of the state) – Lack of due diligence by lenders

Electricity Governance - Prayas - Bangkok Dec Cost of CCGT projects – by size

Electricity Governance - Prayas - Bangkok Dec CCGT Project Costs by Region ( )

Electricity Governance - Prayas - Bangkok Dec Governance Failure In the Indian Electricity Sector : Dabhol Example ……3 Godbole Committee Observation  “The committee is troubled with the failure of governance that seems to have characterized almost every step of the decision making process” This governance failure was  Across governments, Across Times and Across Agencies

Electricity Governance - Prayas - Bangkok Dec Governance Failure In the Indian Electricity Sector : IPP Process In 1992 the government opened up electricity sector for private investments through Independent Power Producer (IPP) route In first three years MoUs for nearly 90,000 MW capacity addition were signed – i.e. More than present installed capacity and at the rate of 90 MW / day ! (24 MoUs in one night) Very limited attention to economy, efficiency, environmental or social concerns

Electricity Governance - Prayas - Bangkok Dec Governance Failure In the Indian Electricity Sector : Agricultural Sales and T&D losses Agricultural consumption is significant, but mostly un-metered (billed on the basis of connected load) since1980s. Utilities “estimate” agricultural consumption and hence T & D losses are also estimated T&D losses = energy available – metered sales – ‘estimated’ agricultural sales

Electricity Governance - Prayas - Bangkok Dec Governance Failure In the Indian Electricity Sector : Agri. Sales and T&D losses ….. 2 Maharashtra Utility: Estimated Theft of Euro 500 Mn p.a.

Electricity Governance - Prayas - Bangkok Dec Consequences of Governance Failure Diverse ‘Public Interest’ concerns are affected Economic: Efficient sector, able to meet demand growth and low tariff Environmental: Efficient use of resources, environmentally sound planning Social - Unaffordable cost, ~ 50% un- electrified houses, project affected people

Electricity Governance - Prayas - Bangkok Dec Incremental generation by efficiency improvement v/s IPP generation (MU/Yr)

Electricity Governance - Prayas - Bangkok Dec Governance Failure: Diagnosis …1

Electricity Governance - Prayas - Bangkok Dec Governance Failure: Diagnosis …2 Coalition of vested interests (sections of consumers, utility employees, bureaucrats, politicians and contractors / private business) took advantage of this and established control over the sector e.g. Agricultural sales estimation  Governance Failure Public Control through elections – several limitations TAP Provisions – Weak, Inadequate, Non mandatory

Electricity Governance - Prayas - Bangkok Dec Investor Public Control (i)TAP v/s (p)TAP TAP - Need to distinguish between iTAP and pTAP iTAP – Investor focused TAP – Independent of government – Clear rules of the game and predictability – Opportunity for sharing investors concerns (E. Act 03, Policy consultations) pTAP – ‘Public Control’ focused  Window of opportunity

Electricity Governance - Prayas - Bangkok Dec Key Attributes of Effective pTAP

Electricity Governance - Prayas - Bangkok Dec TAPing the Electricity Governance: Key institutions, processes and decisions