NEWS
COMMENTARY
INTERVIEW
CHAT
ARCHIVES

The Rediff Business Special:Sandesh Prabhudesai

Power desperate Goa sees privatisation as a way out

The Goan power ministry has clearly told the state government not to approve any medium- or large-scale industrial project unless the power situation improves.

The temptation for multinationals and other industries in Goa, however, is the five-year tax holiday as well as the availability of cheaper land and labour, compared to the neighbouring states.

"The government should approve new projects only if they are prepared to generate their own energy through generators or otherwise," says Power Minister Mauvin Godinho, and adds, "Privatisation is the only way out to overcome the crisis situation."

Goa's Congress government has already gone ahead with its power privatisation ventures. It has signed a power purchase agreement with the Reliance-Salgaoncar Pvt Ltd, a joint venture between Reliance Industries chairman Dhirubhai Ambani and his son-in-law, Dattaraj Salgaoncar. The 50 mw miniproject is scheduled to begin generating power by mid-1998. However, the project is stalled in the high court, which might delay its start.

However, the privatisation policy been severely criticised by the Opposition parties, especially by the state Bharatiya Janata Party unit. Ironically, the BJP's Maharashtra unit has cleared the controversial Enron power project, which the party had vociferously damned when in the Opposition.

'It's a fraud played on the people of Goa," thunders Manohar Parrikar, a BJP legislator. "The deal will simply hike the tariff from 80 paise to Rs 2.02 while the transmission and distribution system would remain the same."

Parikkar points out that only 40 mw power would be supplied to the Mormugao taluka (subdistrict), (there are totally 11 talukas in the state) while the remaining 10 mw will be sold to the Mormugao Port Trust. "So how can you say the whole state will benefit from the project?" he wonders aloud.

A major reason for the despairing situation is the losses incurred during transmission and distribution. "The power situation can't be simply improved with power generation," states Arvind Bhatikar, a business consultant and former MPT chairman. "Our transmission and distribution system is in a total mess and need a complete overhaul."

To that effect, the Goan government has already sought the Centre's nod to privatise its T&D system.

Strangely, Goa receives ample power from the National Power Thermal Corporation. However, it lacks an adequate wheeling capacity, forcing the tiny state to pull only 180 mw to 210 mw of power against its average requirement of 255 mw.

From NTPC, Goa is entitled to 394 mw of power. It returns the allotment of 49 mw from three stations due to the high price -- Rs 1.70 per unit. Out of the remaining 345 mw, available at the rate of 88 paise per unit, Goa can wheel only 210 mw at peak hours, or less.

Moreover, Goa suffers a whopping power loss of as high as 36 per cent: 26 per cent in T&D, the highest in the country, and 10 per cent due to theft. Thus, the total shortfall reaches an incredible 51 per cent.

To make matter worse, the estimated requirement by 2002 will be 410 mw. This growing need, according to a preliminary study, is primarily because of the increase in industries.

Non-planned industrial growth and no proper estimates of the power requirement in over the next decade have hurt Goa. Admits Godinho, "We have suffered due to our utter neglect and non-planning in the past."

Portuguese Foreign Minister Jaime Gama had, during his visit in February, offered his country's expertise to prepare a feasibility report on Goa's power requirement. But no headway has been made in this regard till date.

Plans abound to improve the deplorable situation. For instance, Chief Minister Pratapsing Rane has initiated a dialogue with the officials of the Kaiga Atomic Power project coming up in Karnataka, just across the border with Goa, to get power.

Oil and Natural Gas Commission Technical Director R C Gourth has suggested that the state authorities place a proposal before the Centre for a gas-based power generation plant since liquefied natural gas reserves have been discovered off Goa's coast.

The Goan authorities have also sought the help of the Power Finance Corporation, a World Bank subsidiary, in improving Goa's T&D system. They have already agreed to the precondition of computerising the billing system and adopting a market-oriented commercial approach.

But for all the above, for the present, the Congress government in Goa appears hellbent on setting up at least four more private projects, of 50 mw each. The authorities are also planning to tie up with the RSPL in the near future to privatise transmission and distribution.

Salgaoncar, the owner of RSPL and heads of the Goa Chamber of Commerce and Industry, points to the need to improve T&D. "The power problem in Goa cannot be resolved unless transmission and distribution is also privatised," he says.

Yet, improving T&D is will not be cheap. The conservative estimate, including underground cable-laying, is pegged at Rs 5 billion. "Where will the money come from," asks Godinho in despair, pointing to the state's empty coffers.

Due to the resource crunch, all departmental budgets were slashed by 25 per cent this year. The position is unlikely to improve next year with the government implementing the Fifth Pay Committee's recommendations for government officials.

Strangely, the worst hit department will be the electricity department, which comprises 10 per cent of state government employees. Despite this excessive staff, the department has done very badly in its bill collections.

In a bid to improve the situation, Godinho has also proposed privatising the department with its entire staff strength of over 4,000 people. The government hopes to first convert the department into a corporation and then privatise it.

"What kind of crisis management is this?" asks BJP legislator Parrikar. "It's an open sell-out to the highest revenue generator in the state." Parrikar says his proposals to tackle the situation have fallen on deaf ears, both in the ruling party and in the opposition, due to the heavy clout enjoyed by the Salgaoncars.

Parrikar's suggestions include replacement of old transformers and lines, increasing the number of transformers, levelling commercial and high-tension tariffs as has been done in Maharashtra and Karnataka, reducing power theft drastically, and controlling T&D losses.

"It will raise the annual revenue by Rs 500 million while reducing the power requirement," claims Parrikar. He also favours purchasing the 49 mw power from the NTPC, as the tariff rates are much lower than that of privatised plants.

The state government, however, seems to be in no mood to listen to proposals and ideas. "This is the year for planning, 1998 is the year of action," announces Power Secretary and Development Commissioner Rakesh Mehta, somewhat grandly.

Specials