View from Delhi: Power industry in the dark as chaos reigns

The power ministry has lost its head, literally. Power Minister Suresh Prabhu has quit to devote more time to his party, the Shiv Sena on instructions from his party chief.

At the moment, the prime minister is looking for a substitute, but he doesn't have much of a choice, as the man has to be from Prabhu's own party, which does not have too many competent MPs.

Prabhu was a low-profile but competent minister who was doing his best to clear up the mess that power in India has ended up in.

He was not wholly successful, since electricity is a state subject and there is only so much a central minister can do. Which is why despite his best efforts, the system still refuses to function properly.

Power supply functions erratically across the country except in Mumbai and surrounding regions, which are served by private power companies belonging to Tata and Reliance groups.

In Delhi, distribution is now in the hands of the same Mumbai-based companies but there is little improvement so far. Actually, distribution is only one of the bottlenecks.

The real problem is that supply is not adequate and on some days can fall short of demand by as much as 30 per cent. Some states are known as dark states, as they are perpetually without power. Uttar Pradesh is one of them.

There are large areas in the state where there is no power for days on end and the consumers have to make do with kerosene lamps although some of these areas are quite close to Delhi. Bihar and Orissa are in the same boat. It so happens that these states are also the poorest states in India.

Meanwhile, there are reports that the Maharashtra state government is once again seeking a new deal for Dabhol.

This Rs150 billion project has been lying idle for the past year and a half, after the exit of Dabhol bosses.

The government has asked for a total waiver of of excise duties on naphtha, the main fuel, and exemption from sales tax, along with a cut in interest rates on loans from 16 to 11 per cent. This is expected to bring down the tariff to Rs2.7 a unit, only slightly higher than the current price.

In fact, the power situation seems to be under control in industrial states like Maha-rashtra and Gujarat only because of the ongoing slump in industry.

In Mumbai and Pune, most factories work on a single shift and there is no overtime. In Pune, Bajaj Auto has laid off thousands of workers and so has Tata Electric and Locomotive Co (Telco) which makes its famous Indica cars there.

The state government has come out with a novel scheme for its staff in an attempt to reduce its spending on staff salaries. Government staff can go on leave without pay for five years and join any private company or engage in business.

They can return to their jobs five years later, on the same scale and perks, and, of course, pensions. This is supposed to relieve the strain on government funds, but it is not clear how it will benefit the staff.

Meanwhile the government is pushing ahead with privatisation, the latest company under the hammer being National Aluminium Co (Nalco), which produces more aluminium than any other company in India.

Quite a few global aluminium companies have an eye on Nalco, including Alcoa of Canada, Mitsui of Japan and Kaiser Aluminum of America.

Among the Indian companies, Hindalco of Birlas, which happens to be the largest private sector aluminium company in India, heads the field.

The government has sold off Rs80 billion worth of equity of public sector companies so far. But the backlog is so vast that a government expert thinks that it will take 250 years to finish the task!