It's probably his chartered accountant's background that makes 48-year-old Suresh Prabhakar Prabhu, Union Minister for Power, so obsessed with detail. So even though he's just tabled the Electricity Bill, which frees power generation from licensing and makes trading in power easier, he prefers to hold forth on what he's doing about mundane things like the state of transformers in districts, and poor accounting standards in state electricity boards. This, he insists, is the key to attracting private investment. In between sips of hot water, Prabhu takes BT's Seetha through his high-voltage plans for energising the power sector. Excerpts:

You've finally tabled the Electricity Bill in Parliament. How will it address the various problems plaguing the power sector?

See, we should never believe that a legislation can solve problems that can easily be tackled by management interventions. Unfortunately, in the power sector, all the problems that we are facing today have been aggravated only because we could not address the distribution problems on the ground. That is what we are attempting.

We have already undertaken a massive capacity building exercise for each district. Technical manuals have been prepared, which will be given to specially trained teams. These teams will go to the districts, identify the problem (is it with the distributor feeder, the transformer, the line, the pole) and fix it. These issues cannot be addressed by the Bill. By doing this, we are also quantifying the problem for the first time. We always said distribution is a problem, but what is the problem?

We are also ensuring that every consumer will be metered. The whole process should be completed in another year or so. Some states are making good progress, others are lagging behind.

We also want to convert each and every distribution feeder into a profit centre. The head of the feeder will be accountable for the power that he receives and the amount he collects for what he sells.

What are you doing to put the State Electricity Boards (SEBs) back on track?

As a first step, Rs 41,000 crore of dues owed by the SEBs to the Central Power Utilities (CPUs) will be liquidated in one go. This will take care of several things. One, SEBs will be free of these huge liabilities they were burdened with. We are talking about these grand ideas of privatisation, but when you are saddled with such huge debt how can you privatise? The state governments will issue bonds, so the liability is transferred to them. And rightly so, because some of the SEBs were suffering because of the wrong policies of the state governments. And the CPUs will get all their dues in one go.

Simultaneously, we are asking the SEBs to improve their accounting practices. I have asked the Institute of Chartered Accountants of India to prepare new accounting rules for the SEBs. Once they do that, there will be proper, transparent, and commercially acceptable accounting data available. The last balance sheet of some of the SEBs is 1991-92! How can you think about privatising an asset if there is no commercial or technical data available? This will be available within the next few years. So the SEBs will be restructured within the next few years.

All these steps will revitalise the distribution system, revitalise the SEBs and that will pave the way for revitalisation of the power sector.

The Orissa model of unbundling hasn't worked. Do we have to rethink this entire unbundling concept?

We should understand that just privatisation is not a solution. Hard work is called for at the district level. You go to a doctor, he'll give medicine, you might be cured for a day. But if you follow a strict diet, control your lifestyle you can never fall ill. These issues cannot be addressed by the Bill.

So what, then, does the Bill achieve?

It delicenses generation. Captive power plants and Independent Power Producers (IPPs) should be free to generate power without any licence. What technology they use is none of our business. The tariff is the key issue. And even today, with the Central Electricity Authority (CEA) clearing projects, we have proposed that tariff will be decided by the regulator. So why then are we holding on to your licence?

Will transmission and distribution also be free of licensing?

No, transmission will continue to have a licence, which will be issued by the Central Electricity Regulatory Commission (CERC) or the State Electricity Regulatory Commissions (SERC), as the case may be. Distribution licences also will be issued by the SERC, not by the government.

It is very difficult to get private investment in transmission because it is not as lucrative a business as distribution and generation.

We will provide the transmission backbone in the form of a transmission highway and this will be available to the generator or distributor on a common access basis. They can use it by paying the tariff, which will be determined by the regulator.

Is open access available only for distribution licencees or can bulk consumer also avail it?

Open access is for both. Actually, open access can be provided even from next month if a particular SERC wants to do it. But it must take into consideration issues related to cross subsidisation.

The SERCs will ensure that the interests of all the consumers are taken care of. Once that is done, open access will be available for all.

The Bill gives ERCs power to regulate the supply, distribution, and use of electricity. Won't this put off investors?

Not really. All over the world, electricity is an essential commodity. So, there is need for regulation. Regulators exist even in a perfect free market like the US. The regulator will act like an umpire, taking care of all the conflicting interests.

Why haven't you permitted a spot market in electricity?

I don't think the situation in India is ripe for a spot market. One lesson we all learnt from what happened in California is that we should not borrow foreign concepts blindly. We cannot talk about the 23rd century when the 20th century has not yet begun. In India, where the markets are not perfect, a concept like spot market will put markets in a spot.

Even after the Bill is passed, much of the implementation will be in the states. How will you cross this hurdle?

That's why I have always maintained that while the Bill is important, the will to implement is more important. We cannot wish away the states from this. They own the SEBs. Action lies in the states and the central government is held responsible for their inaction!

Parallel to all this, we are launching a massive awareness campaign. There will be roadshows in every district which will explain what we are doing for the power sector and how the consumer will benefit. So we are involving the people in this whole process. By doing this there will be immense pressure on the respective states to change.

How will you insulate the sector from politics?

I have prepared a common minimum declaration which I expect all the parties to subscribe to. The prime minister has also agreed to convene an all-party meet on this. I am also talking to all political parties. The response has been very good. They are realising that the power sector should be kept free of ideology. This is a technical issue. In the last round of assembly elections, nobody promised free power, something that has happened for the first time in several years. So there is a perceptible change.

The government is targeting an additional 100,000 mw of power generation by 2012. How confident are you of this target being met?

One hundred per cent. We have identified the projects (State, Central, and private sector projects) to be implemented in the 10th plan. Preparatory work has already started on each of them. The ministry is monitoring these projects on a weekly basis. But the private sector won't come in a big way unless we address the fundamental structural issues I spoke about.

The Enron controversy is a major millstone around the government's neck. What is the Centre doing to resolve it?

Yes, Enron is a cause of concern. But let me put things in perspective. Enron has been in India for a long time. Even when there was no controversy our foreign direct investment (FDI) never exceeded $2 billion. Even now it is somewhere around that figure. In any case, Enron's capacity today is 740 mw which is 0.74 per cent of the installed capacity of the country. But we are extremely concerned because it is foreign investment which has come into the country. Therefore, the Centre is doing all that is possible to resolve the dispute.

Several other foreign companies have pulled out of power projects. Domestic firms have also lost interest.

Why? We must go to the root cause of the problem. The root cause is the structural viability of the power sector. And the issues we are addressing will take care of the structural problems.

But it's not entirely true that foreign companies are not coming in. At an international conference organised by Powergrid Corporation, there was an expression of interest from 17 companies, 10 of them foreign companies, for $6 billion of business. In August, we placed orders for Rs 6,000 crore worth of machinery. Around 2,100 mw will be generated by six IPPs in Andhra Pradesh on the basis of a Memorandum of Agreement (MoA). Earlier, projects were funded on the basis of escrow or guarantee. This is the first major departure from this practice. Lending is based on a moa on reforms to be done by the state. Besides, companies from Canada, Austria, Sweden, Norway, Spain, and Russia are keen to participate in the hydel sector. Japan is coming in a big way for our renovation and modernisation project.

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