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Electricity Policy Reform And Responsible Government In India

1610 words - 6 pages

prices well below market value. Many farmers protested the government’s role in the sale, questioning why the state acted as a broker; one remarked that "farmers... also need electricity. Land was acquired in the name of 'public purpose' for the [state-owned] Uttar Pradesh Power Corporation. Why then was it given to [Reliance Power]?" (Kumar 2007). Correspondingly, local groups have started fighting back: after a protracted legal struggle, in 2009 the Allahabad High Court “ruled in favor of the Uttar Pradesh farmers, thereby complicating the company’s plans” (DeVotta 14).
Adding to the electricity sector’s difficulties, the performance of the State Electricity Boards has been plagued by economic inefficiency. To offset the losses from lower tariffs for agriculturalists and concealed theft, Boards gradually began charging higher rates for industrialists, resulting in a system of cross-subsidies. Eventually this led in the 1980s and 1990s to many industrialists eschewing high-cost power from the state grids in favor of in-house captive generation, leaving the State Electricity Boards with fewer financially valuable customers (Kale 2004). As the financial position of the Boards worsened, the utilities were less able to add generating capacity and maintain transmission and distribution networks, resulting in technical deterioration and lost efficiency (Kale 2004). State finances started slumping, as state governments were ultimately responsible for the financial health of the State Electricity Boards. A significant consequence of the ailments plaguing the Boards was their inability to generate capital. Although central government intervention staved off capacity shortages in the short term, electricity was increasingly a constraint on economic growth. By the end of the 1980s, the electricity sector was increasingly dissatisfied with low-quality power, high tariffs, and restrictions on private production (Dubash and Sudhir 2001). For all their benefits as part of a centrally planned system, the State Electricity Boards were not simply efficient with such a lack of competition.
Problems with bureaucratic inefficiency and corruption also pervade throughout the sector as government bureaucracies are hampered by familiar problems of “red tape and rampant corruption throughout government bureaucracies” (DeVotta, 14). Central and state governments, trying to “raise the capital for power stations and... manage distribution systems plagued by inefficiencies, nonpayment of bills, and illegal tie-ins to power lines” (DeVotta, 138) have looked to engage in discussions with international investors and private industries to lessen the burden. Industries such as the electricity sector were required to cross-subsidize support to farmers, which made the prevailing system fiscally unsustainable in the long term, as well as politically fraught because it disfavored industrial interests. By the late 1980s, electricity “subsidies had burgeoned, perceptions of...

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