Struggle against Electricity Act 2003
Assembly of the Working People 2008
The Struggle against Electricity Act 2003: An approach Paper
Background
Our struggle against the restructuring of Electricity Boards has to be viewed not simply as a struggle to protects the rights of the Electricity Workers. The impact of restructuring of the State Electricity Boards (SEBs) on the development of the national economy should be considered seriously.
At the time of independence, India was far more underdeveloped. Backwardness was inflicted on us through decades of imperialist plunder. The hope of the imperialist powers was that they could stall the development of the country, keep us dependent on them and thus make independence merely formal. That is why in the beginning years of independence they refused any aid for the industrialisation of our country. Their hope did not materialise because the Indian bourgeoisie which came to power utilized its newly acquired state power to give an impetus to the industrial and agricultural growth of the country, even though the path of development adopted was capitalistic. In that pursuit of the capitalist path of development in India, the planning process and the public sector in basic, heavy and core sector were important instruments. The progress in Electricity generation played a very important role in the capitalist development.
The ruling class that emerged after independence understood that reliable power can be provided to agriculture, industry and service sector only by a public sector Electricity industry which function not simply on the basis of profit motive. It is this understanding that resulted in the passing of Electricity Supply Act 1948 and the formation of SEBs as per the Act. Gradually other central public sector companies like NTPC, NHPC were formed to help the SEBs in their mission. As per the Electricity Supply Act 1948 SEBs were meant to function on a ‘no loss, no profit’ basis. But the reality was that almost all the SEBs incurred heavy losses. This was because the goal of Electricity industry was not to make profit but to give a stimulus to the economic growth of the country. The SEBs provided free electricity to agriculture and cheap electricity for industries. This actually thwarted the hope of the imperialists to retain India as their dependent. The SEBs also helped the electrification of the rural areas of India and thus spread modernity to our villages. Until 1991, the year in which the New Economic Policy (NEP) initiated under the leadership of Narasinha Rao, India was second only to China in providing cheap power to consumers.
The SEBs were an impediment for the imperialists to push through their interests. They wanted the Electricity sector to be opened for private investment. They also wanted the Electricity industry to be be profit motivated. The monopoly capitalists of our country also had the same interest. That is why the New Economic Policy made the Electricity Board and the Elec. Supply Act 1948, one of its prime target. The New Electricity Policy in continuation of the New Economic Policy enunciated by Narasinha Rao made it compulsory to restructure and unbundle the Electricity Boards into generation, transmission and distribution companies. The Electricity Act 2003 was adopted to make way for the restructuring.
Rationale for privatization
Two basic reasons were given for privatization of the Electricity sector. First, the sector was inefficient, and made huge losses. This reasoning overlooked the fact that losses in the sector were primarily because of highly subsidized power to priority sectors – agriculture, domestic consumption, and low tension industrial use. The rationale for subsidized power to these sectors still remain. Despite its new developing country status, India still remains very low in the ranking for per capita electricity consumption. The per capita consumption at 512 kgoe (kg of oil equivalent) per annum is less than half of that for China, and only one fifteenth for USA.
The second basic reason was that the sector required huge investments, which could only be got through private partnership. Privatization of the sector was also mandated for the country to avail of development funds from the international banking institution.
We need to examine if private participation in the sector actually achieved these stated objectives.
The power sector performance since the nineties
The target for power generation by the end of the Ninth Five Year Plan (2002) was 606 billion 1000MW. As against this, even by 2005, the country had achieved only 587 billion 1000MW. Certainly the injection of private capital participation had not had the desired effect of giving impetus to generation. In terms of efficiency of generation, the plant load factor actually declined from around 58.6% in 1997 to 56.5% in 2005 (based on actual generation and installed capacity for all power generation). Therefore, the argument of greater efficiency also does not seem to have been met.
The Enron project at Dhabol in Maharashtra is a clear case of what privatization entails for the power sector. When the scandal mired project finally started generating power in end 2000, power from the project was available to the Maharashtra government at Rs.8 per unit. At that time the government was selling power to consumers at an average Rs.2 per unit. It was cheaper to keep the project shut despite the huge investment and penalty clauses. The guarantee by the government to purchase power at a rate that assured 16% return on investment was a ready invitation to projects to pad up their costs. The cost of the Enron project at $3billion was more than twice that of a comparable generation capacity.
Electricity Act 2003
It is important to consider some salient features of the Act that would impact consumers of power in the country. First, under the power sector reforms, the three key functions of power generation, transmission and distribution, hitherto all with the SEBs, are being ‘unbundled’ and separate licensees will carry out these activities. Second, a central measure of the Act is the “Open Access” system. As a first step of Open Access, any generating company will be allowed to sell power to any distribution licensee anywhere in the country. In the second stage, the generating company will be able to sell power directly to bulk consumers, bypassing the distribution company. As of now, consumers with requirements greater than 1 MW will be able to avail of Open Access. A new hydropower policy passed by the central Cabinet in January 2008 allows private hydro projects to sell 40 per cent of the saleable power on merchant basis, that is, to anyone they want, at the price they can get. What this means is that the power generation company can choose to sell power directly to the consumer who can afford to pay the highest power. Even if the government lays down norms for distribution companies on power tariff, these will not be applicable on direct sales by the generation companies to private consumers. The distribution companies who can not match these high rates will be progressively starved of power. This in turn means that subsidized power to priority sectors will become an empty promise.
What can be done?
It is a fact that many states have corporatised the Electricity sector and some have even privatised it. We have to take into account these realities while enumerating our demands. Will it be possible to revive the Electricity Act. 1948 and scrap the already enacted Electricity Act 2003? The answer is ‘Not impossible, but it is an arduous task’.
The task before NTUI is to strengthen class struggle in the fight against exploitation. We should persist in the original demands of the struggle of the Electricity employees to scrap the Electricity Act. 2003, and retain the SEBs in the power sector. If we also give up these demands that will only dishearten the working class and strengthen the belief that there is no other way but to submit to globalisation. NTUI will also have to rejuvenate other trade unions in the sector to once again take up opposition to electricity reforms with vigour and courage.
While continuing with this fight, we should also take into consideration the changing realities. While campaigning for our general demand against corporatisation of SEBs we should propagate the ill effects of corporatisation. Wherever SEBs are already corporatised, we should oppose any move to privatise them. We should also add immediate demands arising out of restructuring, ie. taking back the retrenched employees, regularisation of contract workers, stop out-sourcing of jobs etc. But while concentrating on these immediate demands, we can not give up the fundamental demand of opposition to power sector reforms and the Electricity Act 2003.
In the light of the forgoing, we make the following demands central for our agitation:
- Repeal Eletricity Act. 2003
- Roll back the unbundling of the Electricity Boards.
- Central & State Governments. and SEBs take up the task of strengthening Electricity generation, transmission and distribution.
- Retain and strengthen the service orientation of the Electricity Boards.
- Regularise contract workers doing jobs of perennial nature
- Ensure timely revision and other benefits for pensioners.
- Oppose all privatization of SEBs.
December 2008