‘Everybody wants power, but nobody wants a power plant in their backyard’

Maharashtra Electricity Regulatory Commission (MERC) is the nodal body for regulations in the power sector in the State. MERC chairman VP Raja speaks to Moneylife’s Amritha Pillay on the key issues that the State faces on the electricity front

Amritha Pillay (ML): Industries in Maharashtra are currently not allowed to trade on the power exchange. By when can we see a change in this? Wouldn't allowing industries to trade on the exchange help Maharashtra access more power at competitive rates?
 
VP Raja (VP): What you are saying is true; one can say there is reluctance on the part of MAHADISCOM (Maharashtra State Electricity Distribution Co Ltd) to allow open access. But the law clearly provides a provision for open access. The reluctance perhaps comes from the fact that MAHADISCOM has a lot of social responsibility and there is a huge amount of cross-subsidy, which is a historical legacy of taking power to agriculture and residential customers at lower rates. The law mandates that we have to progressively bring down subsidies. Historical realities cannot be written off overnight. We are trying to bring down the subsidies.

However, open access has been allowed to certain people, who have pursued the case. There are industries that have appealed and got an approval. If someone comes to us with a petition, we will look into it.
 
 ML: Given that MERC is aware of this issue, what steps are being taken to solve the problem?
 
VP: Yes, there is a provision for open access; people are welcome on that front. We agree that there are certain issues; we are looking into it to try to expedite the open access process for people with 1 megawatt (MW) or more power. We have tasked ICRA to find out at the generic level what can be done. The law is clear-it is a question on how to transform the law into reality.
 
 ML: Isn't a change in the cross-subsidy (which is zero at present) another alternative that can be considered? Aren't certain modifications planned in the policy?
 
 VP: The cross-subsidy has been kept at zero, because there is a shortage of power, so any additional power that comes in is welcome and we would like to encourage more power coming into the State. There is a good logic supporting the zero surcharges. However, certain representations have been made to us to revisit this matter.
 
ML: What is your view on the current power shortage situation in the State?
 
VP: Today, the State is facing a power shortage because the investments that ought to have taken place in the public sector did not take place. These investments went wrong from around ten years back-with the start of the Enron episode. There was hype that with the private sector taking up the power-generation task, public sector investments could be directed towards social issues like rural development, health, education, social welfare, etc. Both the Centre-through the National Thermal Power Corporation (NTPC) and MAHAGENCO (Maharashtra State Power Generation Co), failed to undertake investments that were required. The effect of these mistakes is now being experienced ten years down the line. But now having learnt that lesson, investments are taking place in the public sector also, in addition to the private sector.
 
ML: What changes do you expect in the State's power situation in the next three to five years?
 
VP: Today we have the national grid. Electricity can flow from one place to the other.  In the 11th Five Year Plan the target is to generate more than 78,000MW ofpower. The country may end up with more than 55,000MW or 60,000MW. In the 12th Five Year Plan, the target is to have around 1 lakh MW of generation, around 60% of this is expected to come from private generation.
 
In Maharashtra, private sector plants are coming up. There is one by JSW Energy in Ratnagiri, which is on schedule. There are power plants by Adani Power coming up at Gondia district. The company has managed coal linkages for this project. Indiabulls Power Ltd plans to put up facilities at Nashik and Amravati. These are the three major private players. All these will certainly have some power purchase agreements signed with Maharashtra. In the next year, Adani's two power units will be ready (660MW each); the first unit will come up really soon.
  
ML: What about the public sector power generation plans in Maharashtra?
 
VP: On the public sector side again, there are a lot of generation capacities planned. NTPC has put up a power plant in Solapur, for instance. MAHAGENCO is putting up new generation units at its existing power plants.
 
ML: According to you, when is Maharashtra likely to turn self-sufficient in its power requirements?
 
VP: For the State to become power sufficient, there are enough projects on the table at present, but the original ground-level issues like land acquisitions are a concern. Everybody wants power, but nobody wants a power plant in their backyard. These kinds of contradictions exist. You cannot put up a power plant without land. There are a lot of projects on the shelf, but how many of them fructify (is to be seen).
 
ML: The Central Electricity Act (2003) favours competition. However, MERC is currently caught in the crossfire between two competitive utilities-RInfra and Tata Power. What seems to be the way forward to encourage competition in the consumer interest? Is there lack of clarity in the process and rules involved?
 
VP: That (competition) is natural; the sector is turning really dynamic. But there is now a choice given to customers. They can now choose amongst utilities. Competition is good, because it gives choice to customers. With the power to choose, all competing providers will have to look inwards (as to) what is the cheapest method of procuring power.
 
 ML: Then, don't you think State intervention could be something which is uncalled for?
 
VP: No, I don't think that (State intervention) is killing competition. The State has certain social responsibilities. It cannot be a silent spectator. A distinction needs to be drawn between electricity as a necessity and as a commodity.
 
 ML: What is your view on this whole power fight?
 
 VP: This whole thing is happening because of the following issue-the fact that tariff is dependent on two important factors, the power purchase cost and the consumer mix, both are different for the three utilities in question. At the end it is the consumer's choice. Once somebody starts losing customers, they start looking for cheaper power. There are various options available for procuring cheaper power. The transition from a monopoly to a duopoly is what has taken place. We will be quite happy to have many more (players).
 
 ML: What kind of thrust has been given for renewable energy sources?

VP: A considerable amount is expected to come up in renewables, where Maharashtra is doing really well. After Tamil Nadu, Maharashtra has the highest investments in renewable energy. We do expect some generation from bagasse from sugar factories. We have given fairly attractive tariffs, so investments have taken place in a number of sugar factories on a co-generation basis. It is a similar case with biomass. On the solar power side, 1MW has already come up. There are a large number of such projects in the pipeline. However, solar energy projects will take some time to stabilise.

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COMMENTS

Dipak

7 years ago

Reform Agenda pushed by Raja Sir,will be the milestone in the History of Power Sector.

G G Dalal

7 years ago

How the politicians are clamoring every year that Maharashtra will be self-sufficient in power by 2011-12? To avoid chronic power shortage, why Maharashtra State is lagging in mandating adoption of energy saving measures like Gujarat State which is doing it since 2000 with immense benefits to the economy of that state?

ARUN

7 years ago

I absolutely agree with Mr. Raja. In order to come out of the power crisis we need more power plants to be set up. We need All types of Power plants depending on the resources available. Just for political reasons many political parties are objecting to the investment for power projects. Objection to Indo US Nuclear Bill, objections to acquisition of land are some of the examples

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SEBI pulls out 17-year-old idea: AMFI should regulate itself

SEBI chairman suggests that AMFI should seriously examine playing the role of a self-regulatory organisation. This idea was first mooted in 1994 and is of dubious merit because the concept of SRO does not quite work in India

The capital markets regulator, Securities and Exchange Board of India (SEBI) has asked the industry body Association of Mutual Funds in India (AMFI) to don the hat of a self-regulatory organisation, instead of acting as a plain-vanilla industry body as it is doing currently. This comes close on the heels of a rash of rapid-fire changes made by the regulator over the last one year. However, this is one idea that dates back all the way to the tenure of GV Ramakrishna.

Speaking on the occasion of the CII Mutual Fund Summit 2010 in Mumbai today, SEBI chairman CB Bhave did not mince words while discussing the current state of the mutual fund industry. After introducing a series of game-changing initiatives over the past one year, that have virtually shaken the very foundations of the mutual fund industry, the SEBI chief came up with the proposition that AMFI take up more responsibility and consider playing the role of a self-regulator for the industry.

Mr Bhave said, "One thing we would strongly suggest is to examine the role of AMFI and SEBI. All this while, AMFI's stand has been that it is not a self-regulator, but an industry body. You need to examine for yourself whether this is the right way to go. The advantage of being a self-regulator is that you can have your own rules about how the industry will operate, without having to turn to statutory laws which are so much more difficult to change. Because this is an industry, you can take this route. But for that we need some commonality of purpose and a certain coming together of minds. This is not criticism but an examination of where we need to go. You need to ask whether in order to reach where you need to be by 2015, the organisation needs to take on a self-regulatory character." It is interesting to note that this 'proposition' from SEBI has come after various attempts on its part at micro-managing the industry, which have mostly led to a lot of confusion.

The truth is that this concept of self-regulatory organisations (SROs) has never worked out well in India. Similar attempts in the past have been in vain. There are no SROs of investment bankers, brokers, depositories or stock exchanges. At one point, there was a vague idea of brokers forming an SRO but this not happened. In practice, the stock exchanges, which wield substantial powers of their own, are not willing to take on the role of even minimal regulation. They prefer instead to pass on the buck to the regulator. When asked about price-rigging in illiquid scrips, the BSE keeps mum. The concept of SRO is really on paper.

The bigger question is, is SEBI, in allowing AMFI to play the role of an SRO, willing to pass on some of its powers to AMFI for that purpose? And if it does, will the regulator stop micro-managing AMFI?

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COMMENTS

MADHUP KUMAR

7 years ago

SEBI HAS REPEATED HISTORY. MANY YEARS BACK THERE WAS AN EMPEROR CALLED MOHAMMED TUGLAQ (MOST IDIOT EMPEROR AMONG MUSLIM EMPERORS). SEBI AT ITS MOST STRONGEST LEVEL HAS REPEATED MOHAMMED TUGLAQ STORY. MOST IDIOT REGULATOR.

MADHUP KUMAR

7 years ago

FIRST WHOLE SEBI COMMUNITY SALERY SHOULD ME MADE ZERO SALERY & THEN UPON SURVEY FROM COUNTRY WHICH WILL CONTAIN -10 POINT TO + 10 POINT THIER SALERY SHOULD BE DECIDED. YOU WILL WONDER INSTEAD OF GETTING SALERY, THEY WILL HAVE TO PAY FINES TO GOVT OF INDIA FOR THIER MISDEEDS PARTICULARLY MR BHAVE.

MADHUP KUMAR

7 years ago

ONLY WAY TO STRENTHEN MUTUAL FUND INDUSTRY IS TO SHOULDER RES[POSIBILITY ON AMFI BY CREATING IT AN SRO.THIS WILL HELP TO UNDERSTAND THE PROBLEMS OF AMC'S, DISTRIBUTORS AND INVESTORS IN A BETTER WAY.
WONDERFUL IDEA.

anil

7 years ago

IRDA ne sebi ke muh pe tamacha maara. ab baari amfi ki hai . amfi IFAs se fee vasulta hai toh IFAs ke liye fight bhi karni chahiye.

Avijit Roy

7 years ago

I do agree that AMFI should take on the role of a SRO at the earliest, subject, of course, to sanctions. SEBI has, in the recent past, taken some steps which, rather than streamlining the MF industry, has created a situation where Fund Houses are seriously considering exiting the business, either in totality or partially. The advisor fraternity are also in a state of serious confusion. They need to be compensated for their efforts and it makes sense for the fund houses to pay them, rather than the investors. It is true that most advisors are ill-equipped to conduct their businesses, knowledge-wise and end up being mere form-pushers than advisors. If we want to replicate what happens in a more mature financial market, we should ensure that the right type of intermediaries are allowed to do this work. AMFI has now enhanced the certification fee to Rs 5000.00 and Rs 2500.00 for renewals. I wonder how many certified advisors would renew their certifications if they have a retail client-base only. It would serve only the corporate advisors who serve corporate investors, where a fee-based payout is possible. For an advisor who deals only with retail investors, many of whom are first-time investors and would be unwilling to part with any advisory fee, it would not be a worthwhile occupation.

If AMFI has to take on a SRO role, it should also be permitted teeth to take realistic measures for the growth of the industry.

Jayesh

7 years ago

My prayer " Get well soon Bhave " finally has been heard by the GOD.
We as distributors suffered heavy loss during this period but anyway "welcome back Bhave". :)

surya

7 years ago

After so much of debate to gain power to regulate insurance,IRDA has showed finger to sebi,What can he do now?nothing..

Aparna Ramachandra

7 years ago

It is amply clear that Mr Bhave has one point agenda and that is to screw up the Mutual fund industry completely. What is it with him, why is he after the IFA's and each of his dime a dozen decisions are hasty and aimed at shooing the investor away!!! leave the industry alone and us IFA's to function in peace....

REPLY

Roopsingh

In Reply to Aparna Ramachandra 7 years ago

This is very right-he looks so worried about MF but least concerned to his main task of direct market-he never talked in these 2 years about any thing to regulate direct market methods-it looks he is more worried for other products like MF,insurance and want to limit them to such extent that exchanges remain only way of investing-may be he had plans to sell ULIPS through exchanges if he was given authority-

Kumaar L

7 years ago

Whether it is SRO or otherwise, the industry body should always take a comprehensive view of all the players involved. No doubt investors need to be protected or empowered. but by the same logic distributors /IFAs who have put in a lot of effort should survive.Any transition, it should be given sufficient time for all players to adjust and any new laws should be suitable for the people where it is implemented.

One thing that favoured the authorities is steep rise in the stock market. But even after that no meaningful inflow is there. Think if the market has not gone up. Even the handful of advisors would not have survived.

Lastly an Apple or Gold or whatever it is, if it is not reached to the people for whom it is meant, it has no value. And if it has to be reached, there is a cost involved. Whoever takes on they should understand this.

kishore ghiya

7 years ago

Sebi is absolutely right, amfi is association of MF amcs not willing to take any actions against their own members who sit on the board.Unless sebi lowers capital required to start MF to rs 1 cr or allow investment clubs same tax benefits as mutual fund industry nothing will change. To change mf industry, make it open aloow new small players to come and see the competition. Do not worry about scams by small mf players, their total amount will be much lower than that of satyam or reliance power ipo which drove retail investors away. Only competition and less regulation will change the scenerion. Pl visit USA and see how easy it is to float mutual funds or start an investment club. There are more than 1 lac investment clubs putting more money every month in us capital market than mutual fund industry.Why worry about regulating small guys when you are unable to punish satyam or investment banker of reliance power ipo.
kishore ghiya rajkot 9825217857

s c jain

7 years ago

Mr. Bhave only knows to HNI, he always work for them. He do not know small investor and distributor.Distributor is only person who is directly atteched with actual investors.Mr. Bhave should do distributor job for atleast five year in rural area to understand the mutual fund small investors

Bheemsen Kulkarni

7 years ago

What SEBI wants, it does not know itself. What Mr Bhave means is to confuse public when you dont know how convince. He has totally put MF industry indark, he wanted do it to IRDA and it hit back and he playing like a new regional political party

sunil More

7 years ago

This Mr. Bhave has to go if mutual fund industry is to see year 2015 already the objective of mutual fund is thrown in the hands of rich people and corporate money by this person no common man interest and participation is left as IFA( individual financial advisor ) cannot afford to take pain for small investments and self regulation for AMFI is too pink picture to think about

girish prasad

7 years ago

is it due to guilt now again we can try to recomer from coma

Ranjan D Gupta

7 years ago

If AMFI really wants MF industry to grow much faster than this present sluggishness then it should take the responsibility to handle the industry as a Self Regulator.AMFI is able to veiw more closely the problems of this industry and can pave the path of rapid growth.This industry will grow if in a single sentence I want to say I should say ......The regulator of this industry must create an enviornment where AMCs, Distributors and Investors all remain happy. If everybody is happy then there is no question of impossibility to reach 15 lakh crore within 2-3 years.

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