SPEECHES / STATEMENTS

PM’s closing remarks at the Conference of Chief Ministers on the Power Sector

May 28, 2007, New Delhi

We have had a very fruitful exchange of opinions on a wide range of issues concerning the Power Sector. As I had said earlier in my opening remarks,electricity is vital for sustained economic growth and the purpose of this conference was to focus on finding practical, pragmatic solutions to the problems of the sector.

From the tenor of our discussions, I believe that there is broad agreement among us on the measures to be taken to improve the availability of power while at the same time improving the financial health of utilities. We have covered in detail all the five themes listed in the agenda. A number of valuable suggestions were made by Chief Ministers which may require a review of some of our policies, programmes and approaches. I am sure that the Power Ministry will take due note of each and every suggestion made by the Chief Ministers. Some Chief Ministers have also drawn attention to a few other issues having a bearing on the Power Sector - such as availability and pricing of gas, royalties for coal, incentivising capacity additions in coal-rich states, securing environmental clearances in a timely manner, timely and adequate coal linkages, benefit sharing in hydro-projects, etc.

Ladies and Gentlemen,

The resolutions that we are adopting today broadly lay down the parameters on which we agree to move forward to improve the performance of the Power Sector. I would like to dwell on a few of these and also on some other issues.

I am happy that there is general agreement on the need to rapidly reduce T&D losses. Building on our resolve today, I request all Chief Ministers to launch a campaign against theft in their states. The Electricity Act provides for constitution of special courts for speedy disposal of theft cases. These courts should be set up and operationalised soon. At the same time, the Centre will provide financial assistance for upgrading transmission and distribution systems. As losses come down to agreed levels, we will reward performing states appropriately. For this purpose, the APDRP scheme is being revised and the contours of this revised scheme will be announced within two months. The Planning Commission, the Finance Ministry and the Power Ministry should finalise this scheme within this time-frame.

It is satisfying that States are rolling out ambitious capacity addition plans so that we can eliminate shortages by 2012. Put together, the capacity addition plans of the Centre and States in the 11th Plan are over three times the achievement in the 10th Plan. While the ambitions are laudable, we need to have effective project implementation and monitoring structures. We will set up a dedicated, professionally managed National Power Project Management Board attached to the Ministry of Power. This Board will keep track of all projects which are to be completed in the 11th Plan and will assist state and central utilities in ensuring that project implementation milestones are met for every single power project. This is the only way we can achieve the ambitious target we have set for ourselves.

Some Chief Ministers have drawn attention to the need for hydro-power development and the need to resolve a number of important issues if hydro-power potential is to be realized. There are unique problems associated with rehabilitation and resettlement. I understand that the Chinese have done fairly impressive work in this regard. It would be useful to set up a permanent institutional arrangement consisting of the main hydro-power generating states so as to ensure coordinated and balanced hydro-power development. I would urge the Power Minister to set up a Task Force on Hydro-power to lend special focus to this important area. This Task Force should also look into the issues of rehabilitation and resettlement of project affected persons.

Ladies and Gentlemen,

Coming to the issue of open access, I feel that the command and control approach will be increasingly unsuitable for managing the power sector in future. What was possible with existing approaches when capacities were small and consumption was low may be impossible when we talk of adding 15,000 MW each year. It is a matter of satisfaction that there is unanimity all round in promoting open access. It will be heartening if all states aim to convert this aspiration into reality and we see more power sourced from alternative suppliers within a year - say 3% to 5%. This would then be a significant step in moving towards genuinely competitive markets in power. I would request the Power Ministry to consider incentivising this by linking a part of the unallocated share of power to meaningful structural reforms, such as open access.

On Bharat Nirman, I commit the Central Government to electrifying all villages by 2009. If there are operational and cost issues, these will be sorted out in the next few weeks. Sixty years after Independence, we can no longer accept a situation where almost one lakh villages do not have electricity. How can we ensure equitable and inclusive growth if such a large part of our country does not have access to a basic service such as electricity? This is not compatible with the economic aspirations we have for our citizens. I assure Chief Ministers that all issues raised by them with regard to rural electrification will be sorted out.

While on the issue of rural electrification, I wish to point out that under the Electricity Act, states have the freedom to provide subsidies for specified categories of consumers. Given that poverty levels in our country are still high and given that electricity is a basic necessity for some activities, I foresee that we need to give some subsidised power to the poorest consumers for some time to come. This is a social obligation. At the same time, we must move towards a more transparent system of subsidies. States could undertake a thorough review of the present subsidies in power tariffs with the objective of targetting these better and gradually moving towards a system of providing direct subsidies.

There have been some references to the role of regulators. The regulatory structure is doing reasonably well, particularly in tariff setting, prescribing standards, grid discipline and dispute resolution. Having established the basic rules of the game, I would urge that they now look at the promotion of competition, efficiency, restructuring and investment, as they are required to do under the Act. Regulators are not supermen. They have to function strictly within the legal framework. If they do not and take measures not strictly in consonance with public interest, then I see no reason why the States and the MoP should not intervene decisively. After all, the law is quite clear on this. Regulators should regulate - but not over-regulate. They should not become parking places for retired bureaucrats.

Ladies and Gentlemen,

The Conference has resolved to set up a Standing Group of Power Ministers under the Chairmanship of the Union Power Minister. This group can look at all issues affecting the power sector, including those arising out of this conference and the resolutions adopted today. I have great hopes from this Standing Group. Their counterparts on the Finance side have done a great job in implementing VAT across the country. It is up to this distinguished group to firmly tackle the challenges at hand, rise above local considerations and prepare a long term roadmap for sustainable power development. It can also guide and educate public opinion on the need for having a viable power sector and create a momentum for good practices.

The investment needs of the power sector are gigantic. I therefore propose to constitute a Sub-Committee of this Standing Group to look at financing issues - particularly for upgrading transmission and distribution networks. This Sub-Committee can be chaired by the Finance Minister and would include the Deputy Chairman of the Planning Commission. I expect this Sub-Committee to finish its work in three months.

Finally, there is a lot to be done at the policy planning level at the Centre. We are committed to revamping the APDRP scheme and sorting out Bharat Nirman issues. I intend to hold a meeting of the full Planning Commission by the end of July to finalise these pending matters so that we can get down to the real task of improving our networks.

It has been a historic and fruitful conference. I thank all of you for participating in it and look forward to meeting you tomorrow in the NDC.

Thank you.