The two recent court orders provides how the power sector is undergoing transformation. Before the Electricity Act 2003 was implemented the power sector had more of a monolithic structure. Generation, distribution, transmission was done by a single entity - the state electricity company or companies like Tata Power in Mumbai and RPG group in Kolkatta. But a monolithic pillar can not support a high rise structure which India needed as more electricity was required to fuel the above 8% economic growth over the last decade. So the Electricity Act helped in creating a scenario where a high rise will be build on multiple pillars - the generation company, the distribution company and the transmission company. So far so good.
But, the recent orders - Delhi HC order to the DERC (Delhi Electricity Regulatory Comission) on reduction of tariff and the Supreme Court order to MSEDCL(Maharashtra State Electricity Distribution Company Ltd) on open access provide clear indication of how the interplay between private, public and government institutions is giving rise to confusion in the sector. Not to mention the issues raised by each of the organisation against the other are very pertinent. But that calls for more co-operation among all the participants and less of competition. This is a complex situation as each of the institutions have their own stakeholders to whom they serve. A working paper on the Indian power sector by Saugata Bhattacharya and Urjit Patel encapsulates many of the issues that is giving rise to the confusion. The paper even mentions the risk some of the financial institutions may run into if the uncertainties persist for too long.
Coming back to the topic of Change. If one goes out of the house there are chances that the person may get caught in a storm. But this does not mean that one should never step out of the house to explore the opportunities. Leadership in the sector can be provided by those companies who can ride the storm as they will have the opportunity to create the road-map in the sector for others to follow. As Warren Bufffet says "Volatility is a friend of the investor". As long as there is policy volatility in the sector, the sector will remain attractive for long term investment.
But, the recent orders - Delhi HC order to the DERC (Delhi Electricity Regulatory Comission) on reduction of tariff and the Supreme Court order to MSEDCL(Maharashtra State Electricity Distribution Company Ltd) on open access provide clear indication of how the interplay between private, public and government institutions is giving rise to confusion in the sector. Not to mention the issues raised by each of the organisation against the other are very pertinent. But that calls for more co-operation among all the participants and less of competition. This is a complex situation as each of the institutions have their own stakeholders to whom they serve. A working paper on the Indian power sector by Saugata Bhattacharya and Urjit Patel encapsulates many of the issues that is giving rise to the confusion. The paper even mentions the risk some of the financial institutions may run into if the uncertainties persist for too long.
Coming back to the topic of Change. If one goes out of the house there are chances that the person may get caught in a storm. But this does not mean that one should never step out of the house to explore the opportunities. Leadership in the sector can be provided by those companies who can ride the storm as they will have the opportunity to create the road-map in the sector for others to follow. As Warren Bufffet says "Volatility is a friend of the investor". As long as there is policy volatility in the sector, the sector will remain attractive for long term investment.
