Power Generation Industry - Privatization alone is not enough
The growth of the industrial economy of India depends on the rapid development of the badly lagging power generation sector. Though India has abundant natural resources for generation of both hydro and thermal power, infrastructural shortcomings may bring the power industry to its knees
By the end of 1995, India's total installed power generation capacity was 81,164 Megawa. Of that, hydro-electricity (hydel) accounts for almost 26 percent, but hydel accounts for less than 13 percent of the total electricity generated in the first three years of the current eighth plan.
In the thermal power segment, the average plant load factor (PLF) has improved in recent years, especially in the south and west of the country.
Thermal power generation appears to be the most promising way for India to meet it's power requirements over the next years. The previous government as well as the new United Front governmentb have several projects on hand to best serve this requirement.
Among the projects on the anvil is a plan to privatize the fuel supply system. In most proposed power projects, fuel leakage and fuel risk responsibility have been among the main stumbling blocks. The state as the fuel supplier is unwilling to sign any guarantees and the private power companies are unwilling to risk running out of fuel.
India has huge reserves of coal, a sector which has been partially privatized, but the government has not done enough to attract investors to develop the mining industry. Also, the concept of developing captive mines has not yielded much benefit for the power companies due to the problems related to economies of scale.
Another related area where this argument is extended is the transport sector. The previous ministry of transportation was in the view that the legally enforceable commercial agreement with transporters of fuel like the railways should be made into a mandatory clause.
Once the basic transport and resource utilization (mining, petroleum refining) infrastructure starts developing apace with the needs of the power generation industry, the thermal power units will start to be functionally efficient, and the needs of Indian industry will be better met.