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Transparency essential for power projects

This is a win-win proposal which the finance minister should waste no time in grabbing with both hands and passing on to power-deficient states such as Karnataka and Kerala for speedy implementation. Though precedent-bound bureaucrats are likely to look askance at such a radical (in the Indian context) proposal, it needs to be tried as a quick-fix solution to the chronic power deficiency which threatens to derail the Indian economy at a time when it has broken out of the circle of the so-called Hindu rates of growth (GDP growth of 3.5 per cent per year).

Though this proposal may seem to be radical in the Indian context, there is much to be said in its favour. It would eliminate the complex negotiations about type and source of fuel, average installed capacity utilisation and purchase-price agreements based on the estimated cost of unit of power generated. The embarrassing ineptitude displayed by Indian bureaucrats while negotiating and renegotiating the Enron power project in Maharashtra is a good argument to keep power generation agreements with the giant power sector transnationals as simple as possible. They pack too much firepower and negotiating skills for our gullible bureaucrats to match.

In neighbouring Pakistan the Nawaz Sharief government has adopted this very stratagem of stipulating the price per unit of power generated which the government is willing to pay and inviting power sector transnationals to do the rest. According to press reports from Pakistan our neighbour's power availability situation has improved dramatically.

Perhaps the most compelling argument in favour of negotiating only the end price that the state electricity boards pay as guaranteed by the Union government, is that time-consuming procedures such as land acquisition will be handled by the company proposing to construct the power generation facility. Hitherto land acquisition has been the burden of state governments which are invariably lethargic in completing acquisition proceedings. Power industry majors and transnationals in particular are likely to offer better prices for land and thus are likely to get generation projects off the ground more quickly.

Likewise, details such as the choice of technology and fuel need to be decided by the power generating company rather than negotiating teams constituted by the central and/or state governments. Government participation needs to be limited to providing broad indications of proposed sites and providing facilitation services for the speedy implementation of power project proposals. And given the local-level and environmental activists's opposition that proposed power plants invariably attract, the task of obtaining environmental clearance should also be discharged by the power generation company rather than the state government.

Despite it being so clearly in the national interest that the procedure for clearing fast-track power projects is drastically simplified, why do the central and state governments insist upon following the outmoded and time-consuming clause-by-clause methodology of negotiating power generation contracts? Though the standard reply is likely to be that such capital-intensive projects need detailed scrutiny and negotiation, the plethora of scams and rackets surfacing within the economy suggests that prolonged periods of negotiation are ingeniously utilised by politicians and bureaucrats to negotiate cuts and commissions for themselves.

A process which invites proposals by pre-determining the purchase price which the state government-owned SEBs would pay per unit of power supplied, is too transparent and simplistic for politicians and bureaucrats long accustomed to detailed negotiations which afford the opportunity to derive private profit while protecting the public interest.

This might seem a harsh and sweeping judgment. But the chronic power outages which are threatening to derail the economy at a time when it seems to have been aroused from its deep socialist slumber are too dangerous a threat to permit further pussy-footing and diplomatic niceties. The speedy construction of power generation facilities through the adoption of simple and transparent procedures is vitally necessary to avoid the imminent power famine which is round the corner.