Volume 16, Number 1 Article by T R Satish Chandran March, 2004
History of ReformsHistory of Reforms :
Satish Chandran, former Chief Secretary of Karnataka, traces the history of budget allocations to the power sector since 1960 as well as the policy measures since liberalisation in 1991-92. Budget outlays increased steadily till the Seventh Plan (1986-90), but thereafter, in the reform period, they declined. Ironically, the power sector suffered a setback during a period of aggressive policy reforms. In this period, investment targets, for both the public and private sectors fell dismally short of target. Despite many sweeteners to attract independent power providers (IPPs), few projects achieved financial closure, mainly because they involved near-bankrupt SEBs, among other discouraging features of the business environment, such as discrepant signals between the centre and the state, and lack of transparency.
Looking forward, the Tenth Plan shows a welcome increase in the budget outlay to the power sector, but this further increases reliance on the centre. The states must increase their allocation to the power sector to foster improvements in distribution, Satish Chandran argues. Private capital will have to become the main engine for capacity additions in the future, though a transition period is unavoidable, during which the sector has to rely on public sector investment and improve its financial standing.
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