Create national power distribution firm, de-nationalise coal: Infra expert

The infrastructure agenda may be huge, but Vinayak Chatterjee, an expert in the sector, believes that the Narendra Modi Government should prioritise five areas — power, railways, land, capital and public-private partnership.

On power, Chatterjee, Chairman of Feedback Infra Pvt Ltd, a leading integrated infrastructure services company that he co-founded, and Chairman, CII National Task Force on Infrastructure, says the Government should create a national power distribution company and de-nationalise coal.

There are compelling reasons, he argues, for creating NPDC — National Power Distribution Company — given the poor financial health of the distribution companies in the States, because of which a number of new power plants are not able to generate and sell electricity. Given the fact that a National Generating Company (NTPC) and a transmission company (PowerGrid) have been created, he feels it is perfectly rational to go in for a national distribution company.

“It is not that these interventions did not happen in India. We are sick and tired of waiting for the State distribution companies to reform themselves,” says Chatterjee. The problem with the discoms has persisted since the late 1980s and they have been through two rounds of fiscal reform.

According to Chatterjee, more than 5,000 MW of generating capacity is ready but there are no takers for the electricity because the discoms do not have the money to buy electricity from these plants. Industry too is suffering as it spends huge sums of money in setting up captive power plants.

Chatterjee told Business Line that a few other issues too make the case for a national distribution company stronger. One, gas prices are likely to be increased. Two, because of this, a pooled pricing of electricity will have to be adopted. The distribution companies are in no shape to do this. Three, open access has to be pursued vigorously, especially since most States are not keen on going ahead with it.

The national distribution company, according to Chatterjee, will jolt the discoms out of their somnolence and help pursue an open access system where customers are able to choose who they will buy electricity from and where generating companies have the freedom to sell power to the buyer of their choice and not be tied to State distribution utilities.

The NPDC, Chatterjee said, could pick up stranded capacity and would be able to implement the pooled pricing decisions of the Central Government. “The present model is not working. There must be a surgical solution and NPDC would have to do it,” he said. The proposed distribution company could sell directly to bulk consumers — industrial consumers, who would then not have to use their DG sets, or a city administration or a municipal body.

“If I can have a logic for NTPC on generation, if I can have a logic for PowerGrid on transmission, I have a far stronger logic for an NPDC on distribution,” he argued.

He also advocated de-nationalisation of the coal industry. Despite having huge coal reserves, India imported 150 million tonnes. The way out was to open up the coal sector. Chatterjee said the CII would include the five priority areas in its presentation to the new Government. As far as the Railways is concerned, his suggestions would be to create an independent railway board with the Ministry confining itself to policy issues. Besides, there should be an independent regulator for the sector.

Land, which is as much an important factor as labour and capital as far as production was concerned, was a critical issue. For this, Chatterjee’s suggestion was to create a central land bank corporation, with similar organisations in the States, to acquire land for industrial and commercial use. This would be like the development financial institutions that were created in the 1960s with the States too forming industrial promotion organisations. The central land bank corporation could be sufficiently capitalised for it to acquire land and draw up master plans.

On the acute shortage of capital for infrastructure projects, Chatterjee said the new government should give a major push to infrastructure debt funds. As far as PPP projects were concerned, he said investor confidence needed to be revived and this could be done by creating a PPP commission. This body would look at re-setting the model concession agreements and also be a forum for credible, transparent re-negotiation of disputes.