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Confession as a farce - The Economic Times

Editorial ()
5 December 1996

Title : Confession as farce
Author : Editorial
Publication : The Economic Times
Date : December 5, 1996

Disingenuity mars Dr Manmohan Singh's confession of over-
reliance on private investment for power generation in
the eighth plan. True, the public sector failed to invest
appreciably in the power sector during the last five
years. To dress this up as the result of a deliberate
policy preference for private investment is to camouflage
something particularly ugly. That something is bankrupt-
cy. Would the result have been any different, had Dr
Singh and colleagues pursued state electricity boards
(SEBs) for investment rather than MoUs with prospective
private investors? Absolutely not. To invest, you need
funds, not moral suasion. However much of the latter Dr
Singh had supplied, the SEBs would still have had little
of the former. Electricity in India is a sad saga of
bankruptcy even the bright, spots in the larger picture
of gloom, like the NTPC, NHPC and PowerGrid, have the
same inglorious origin. It was the bankruptcy of the SEBs
and resultant paucity of power that forced the Centre to
intervene with central PSUs like NTPC and NHPC. While
these have been relatively efficient organisations, they
too have to sell their power to the SEBs which often fail
to pay their dues. This compromises the ability of the
central power PSUs to generate investible resources.

Financial bankruptcy of the SEBs is the direct result of
political bankruptcy. Politicians have convinced them-
selves and the voters that it is the bounden duty of the
state to subsidise most things under the sun. The subsidy
drawn by farmers on power for irrigation is the largest
drain on the SEBs around Rs 30,000 crore a year. Some of
it is made up by penal rates on the numerically smaller
class of industrial consumers and tiny subventions from
state budgets. Most of it shows up as losses, depriving
the SEBs of investible funds. During 1991-95, the average
PLF went up from 54 to 60 per cent. But the more the
SEBs generate, the larger their losses the fastest grow-
ing segment of consumption is the most subsidised rural
sector. It is this entire mess that the former finance
minister sought to pass off as an error of judgement.

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