Deregulation is not always the answer. Though it would not be correct to say it is never the answer. With the power sector going the way it is, it seems the government is open to trying just about anything. Including making it someone else’s headache; at least as much as a government can make a major utility someone else’s headache.
The government is set to give operational and maintenance control of four power generation companies to the private sector for 10 years. This is just testing the waters; if the things turn out right, the time period might be extended and so might the number of companies in question.
Now handing over these GenCos over to the private sector, even if for a little while, means certain changes. Expect some layoffs here. Even the keenest of the keen labour activists cannot not shy away from admitting that there companies are woefully overstaffed.
And then there are the prices. Tariff design is going to prove to be a hassle. Yes, the government is going to be regulating the whole racket but the laws of economics aren’t hostage to governmental decree. If what the state has in mind isn’t sustainable, the GenCos won’t be interested in the project in the first place. It remains to be seen what the public would hate more: electricity shortages or expensive electricity.
The whole electricity matrix isn’t limited to generation. The GenCos are important, yes, but so are the DisCos. Distribution and transmission losses accounted for 20.3 percent of all the electricity generated last year alone. That is huge. Transmission over the grid has to necessarily yield to losses – plain physics – but if these amount to more than a fifth of the total energy generated, we can safely say there is much to be desired there. Maintenance requires capital, which the private sector might provide.
These and other questions are going to depend upon how the experiment with these four companies goes. The private sector has, till now, done nothing but complain about the power situation and not done too stellar a job when given a shot itself (KESC, anyone?) Here is a chance for some redemption.
