Electricity Sector Governance In India: Need for ‘Public Control’ through TAPing

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

2. 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. 03

3. Governance Failure In the Indian Electricity Sector: Dabhol Example ……1 • Enron’s Dabhol Project (DPC) (1992 - …..) • 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. 03

4. 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. 03

5. Cost of CCGT projects – by size Electricity Governance - Prayas - Bangkok Dec. 03

6. CCGT Project Costs by Region (1994-2000) Electricity Governance - Prayas - Bangkok Dec. 03

7. 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. 03

8. 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. 03

9. 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. 03

10. 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. 03

11. 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. 03

12. Incremental generation by efficiency improvement v/s IPP generation (MU/Yr) Electricity Governance - Prayas - Bangkok Dec. 03

13. Governance Failure: Diagnosis …1 Electricity Governance - Prayas - Bangkok Dec. 03

14. 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 • Public Control through elections – several limitations • TAP Provisions – Weak, Inadequate, Non mandatory  Governance Failure Electricity Governance - Prayas - Bangkok Dec. 03

15. 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. 03

16. Key Attributes of Effective pTAP Electricity Governance - Prayas - Bangkok Dec. 03

17. TAPing the Electricity Governance: Key institutions, processes and decisions Electricity Governance - Prayas - Bangkok Dec. 03