Delhi's electric debacle

Shaken, the government cancelled the hike.

This happened three years after the Delhi Vidyut Board was "unbundled" into a generation company, a transmission corporation, and three discoms, and privatised. The arrangement was meant to promote efficiency, reduction in power thefts, and better consumer service, including accurate billing and prompt complaints redressal.

The middle classes celebrated the DVB's demise thinking that "governments are bad and the private sector is good;" the discoms would remedy the DVB's "greatest malady" -- theft of power by slum-dwellers -- and eradicate inefficiency and corruption.

The opposite happened. As one privatisation votary says: "We are back to the DVB days [in service]. But pay twice as much."

All privatisation assumptions have proved false in Delhi. Power theft continues at 30 percent-plus despite harsh action against slum-dwellers. Numerous surveys show that it's the rich who steal power. They also tamper with meters.

The government pampered the discoms with "sweeteners" in violation of contracts, including interest-free loans (Rs 1,416 crores) and a Rs 850-crore subsidy. Rates were raised 10 percent last year and six percent in 2003-4.

Yet, most of Delhi suffers loss of power two to three times daily. The discoms have been installing faulty and fast digital meters. Many residents are refusing to have the old ones replaced.

Hopes that complaints redressal would improve have turned sour. Earlier, you at least got a belated response after dialling the DVB. Now, after many more attempts, you get a call-centre operator. The discoms give you plenty of information on where to pay your bill, but not a number for complaints!

Less than half of Delhi residents polled by the Times of India believe that privatisation has improved matters. Thirty-nine percent want the DVB back! (Only 43 percent say no).

After the Delhi debacle, it's time for a rethink on power privatisation in India and the world. India's privatisation record is more than a decade old.

India tried two different routes: buying electricity from independent power producers (IPPs) like Enron, AES, and Spectrum; and more radically, "unbundling" integrated state electricity boards (SEBs) and selling them off, beginning with Orissa (1996).

Both routes have proved costly, inefficient, and damaging to public welfare.

Take the IPPs. Eight projects were put on the "fast track." Only three materialised -- all scandals. The worst was Enron.

Enron set up a 2,140 MW gold-plated plant with costs padded up by 100 percent. There was no competitive bidding and the power purchase agreement was opaque and loaded against the Maharashtra SEB. Dabhol's guaranteed high plant-load factor meant the MSEB had to back down its own cheap hydro stations and pay Enron eight times more.

Dabhol was only partially operational, for under two years. But that inflicted a Rs 1,000-crore loss on MSEB. The country's best-run board was driven into insolvency.

Enron is now being "revived" under United States and corporate pressure -- at our public's expense.

The "unbundling" route, favoured by the World Bank-Asian Development Bank, has fared no better. In Orissa, it was to produce low-cost electricity. Instead, it led to a doubling (and more) of tariffs, endless disputes between gencoms, transcoms, and discoms, revenue shortages, and persistent transmission losses. There was no efficiency improvement.

The government has learnt no lessons. The Electricity Act, 2003 reflects its continuing irrational fascination with privatisation. But states which have resisted privatisation (especially the Southern ones), are doing better than Orissa or Delhi.

Global experience with privatisation is unhappy too. Private companies aren't inherently more efficient, nor produce power more cheaply.

Private companies look for "regulatory bargains" through extra-quick returns, and indulge in cherry-picking affluent customers. Private firms won't go to rural areas.

So there have been grass-roots anti-privatisation revolts in Australia, Brazil, Canada, Colombia, France, Indonesia, Mexico, Senegal, South Africa, South Korea, Thailand, and the US. These have reversed or modified policies.

In South Africa, there was a mass campaign to reconnect disconnected power lines to poor shantytowns. In Sri Lanka, South Korea, Mexico, Brazil and parts of Canada, Australia and the US, privatisation has been halted. In Western Europe, it has been slowed down. Countries like Indonesia and Britain, which went to headlong into privatisation, have come a cropper.

Privatisation hits the poor especially hard. Private companies sharply raise rates and cut off those who can't pay. For details, visit www.tni.org (Lights Off! and Lights On!) and the work of Public Services International Research Unit (website www.psiru.org) and India's Prayas Energy Group (www.prayaspune.org)

Even the World Bank now admits privatisation is "no panacea." An official report (2003) notes that its power portfolio has become one of its worst performers. Another report (2004) acknowledges failures, warning that unbundling "makes the regulatory task more complex, which is likely to be a problem in most developing economies" -- so governments shouldn't "oversell the benefits."

Earlier, the Bank lent between 75 percent and 93 percent of all power sector loans to sustain privatisation.

Power multinationals too are withdrawing the world over because of high currency risks, demand volatility and political risks. Examples are US companies Edison International, NRG, Aquila, CMS Energy, Duke Energy, Powergen and TXU, and Canada's Hydro-Quebec.

The real issue in power is not ownership, but governance and accountability. There is no evidence anywhere that private ownership produces better results.

India must reform its SEBs and public enterprises like NTPC. We must stop power theft, meter all electricity (only half is currently metered), and improve efficiency. We must root out corruption through cooperation with power workers' unions. We must promote conservation and low-cost options.

That's the way out of darkness and inequity -- into light and reason.

Praful Bidwai is an eminent Indian columnist.