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Govt to let pvt power be sold direct to consumer

India will allow private producers to sell power direct to consumers, lifting curbs on supply that have cramped a decade-old reform effort, Union Power Minister Suresh Prabhu said.

Prabhu said the question of the affordability of power had prompted him to ask India's states to permit third-party sales of power, an issue analysts have called a stumbling-block in luring foreign investors into the sector.

"They cannot force a generator to sell power only to the SEBs, and that's a major change we are trying to make," Prabhu said, referring to the states, in an interview late on Sunday.

SEBs or state electricity boards are government run utilities which supply power to most of India.

"The skewed way in which tariffs are structured today -- for example, there is a lot of cross-subsidisation, so industry really pays much higher than what their counterparts are paying in other parts of the world," Prabhu said.

"One of the ways to tackle this problem is to ask the generator to find his own market," he added. "If for that price there is a market, there is some taker at that price, there should be no problem. So that's the reason we are now asking the states that they must allow a third party sale."

The government estimates India's thirst for power can only be slaked by the addition of about 100,000 MW of fresh generating capacity over the next 12 years. The bulk of the necessary funds will have to come from private foreign investment.

States' plans to boost power capacity over the next six years would probably be stymied by a lack of resources, Prabhu said.

The hitch has been the poor finances of the SEBs which are expected to run up a combined loss of Rs 285.45 billion in 2001-2002, largely because of mismanagement and theft in power distribution.

Each of India's 28 states could expect to have to add between 2,000 MW and 3,000 MW of power capacity in the next six years, Prabhu estimated.

"Traditionally we have been taking one-third of the burden," he said, referring to the cost of setting up new power plants.

"Maybe we'll continue to take one-third of the responsibility," Prabhu said. "But the other two-thirds should come from either the state itself or from the independent power producer, or IPP.

"Now the states are not going to be in a position to buy that power at the price that we will generate it," he added. "Then the other choice, the only choice, is to ask the private generator to sell power direct to the consumer."

Asked if the Power Ministry was willing to do this, Prabhu said, "Absolutely. And in fact this is what we are offering to the present IPPs. I have already offered it to all the IPPs in India today."

He gave no details of the private producers' response, however.

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