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

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Electricity Sector Governance In India Need for
Public Control through TAPing

• Shantanu Dixit
• Prayas, Pune, India
• Shantanu_at_prayaspune.org

Workshop on Electricity Governance in
Asia Bangkok, December 2003
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Outline of the Presentation

• Examples of Governance Failure in the Indian
  Electricity Sector and its consequences
• Prayas Perspective Public Control through
  TAPing
• Transparency, Accountability and, Public
  Participation
• Public Control through TAPing Key
  institutions, Processes and Decisions

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Governance Failure In the Indian Electricity
Sector Dabhol Example 1

• Enrons 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

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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

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Cost of CCGT projects by size
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CCGT Project Costs by Region (1994-2000)
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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

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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

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Governance Failure In the Indian Electricity
Sector Agricultural Sales and TD 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
• TD losses
• energy available metered sales estimated
  agricultural sales

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Governance Failure In the Indian Electricity
Sector Agri. Sales and TD losses .. 2
Maharashtra Utility Estimated Theft of Euro 500
Mn p.a.
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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

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Incremental generation by efficiency improvement
v/s IPP generation (MU/Yr)
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Governance Failure Diagnosis 1
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Governance Failure Diagnosis 2

• Public Control through elections several
  limitations

• TAP Provisions Weak, Inadequate, Non mandatory

• 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
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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
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Key Attributes of Effective pTAP
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TAPing the Electricity Governance Key
institutions, processes and decisions