The logic of comparing the uncomparables.
Philippines is a small country, with a number of islands. Its power system is essentially centred around supply to Manila, with Manila Electric Company (which supplies to 2.1 million consumers - same number of consumers as Delhi's DESU) accounts for 60 % demand of the whole country. On the other hand, India is a large country with an installed capacity of over 87, 000 MW with the SEBs networks serving 77 million consumers - comparable to U.K, Germany, or France. But for the World Bank. and their camp followers in the Government of India, both are merely Third World countries that need to be restructured in an identical manner for the benefit of the Multinationals and their host developed countries.
In 1991 the generation sub-sector of the power industry in Philippines was 100 % public owned and by 1998 the target is to ensure that 80 % of the generation is with foreign investors owned Independent Power Plants (IPP). Going by the statements of the Prime Minister and the Minister for Power, the Indian Government has set itself the same target, but since India is a large country the time required would be longer. What is important is that the mechanics of achieving this and even the terminology (like "fast track projects") used is identical..
Since structural adjustment in Philippines was well ahead of us, the consequences of the policy needs to be examined, since it is reasonable to expect that the "benefits" that visited the people of Philippines would also visit us.
For purpose of comparison we take two documents:
A letter addressed to Members of Parliament by the National Working
Group of Power Sector (and signed by M.K Sambamurthi, A.N. Singh,
J.K. Bhasin all former Chairmen of the Central Electricity Authority;
N. S. Vasant, B.N. Ojha both former Chairmen of State Electricity Booards;
Hiten Bhaya, Arun Ghosh former Members of Planning Commission; S.P.Shukla
former Finance Secretary, K.Ashok Rao President, NCOA and D.K.Puri Gen.
Secretary, All India Power Engineers Federation)
and
Philippines: Power Sector Study - Structural Framework
for the Power Sector, World Bank, Industrial and Energy Operations Division
November 30, 1994.
Both countries were initiated into the structural adjustment policy for power with seven "fast track" projects and most of the early PPAs were the result of solicited and unsolicited proposals that were followed by negotiated arrangements, supported by sovereign guarantees.
Any pretext will do for extortion.
The National Working Group had contended that the investor power plants (IPPs) were at an exorbitant cost and this was mainly because of there being no competitive bidding.
The Working Group's letter stated,
"What is Inexplicable is why the cost of thermal power plants has
gone up from a range of 15 - 30 million Rs /MW to 35 - 50 million Rs. /MW.
This cannot be explained either by devaluation or inflation except on the
basis of unjustified higher imports being assumed and implied."
The World Bank report states that the seven "fast track" projects in
the Philippines were high cost plants, less desirable economically, The
World Bank report vindicates the Working Group by stating,
" Whereas NPC's example so far has been that IPP proposals that
were solicited through a transparent bidding process encompassed both lower
prices and greater likelihood of coming to closure".
The Government of India has recently announced, with much fanfare that for future projects competitive bidding would be mandatory. The catch however is that the future projects are those that would be taken up after the 100 odd projects, expected to add 50,000 MW for which MOUs have been signed. (it took forty years to add 70,000 MW) The mockery of the whole exercise is evident from the fact that the Andhra Pradesh Government signed 23 MOUs overnight just to beat the date line set by the Government of India for implementing the system of competitive bidding and the Chief Minister of the State claimed he would have signed 42 more but for the lack of time.
The World Bank report further states,
"the earlier projects, even with their relatively high
costs, were justified in economic terms due to power outages, and the most
recently contracted private projects have had lower prices and costs, closer
to international levels."
Unfortunately, in India there was no such identical critical power outages
to justify the higher costs so the Ministry of Power Govt. of India invented
a crisis by making statements like,
"..this (opposition to the policy) will play havoc with the power
supply situation in the country creating a shortage at the end of 31.3.1997nearly
double the present shortage."
prompting the Working Group to allege that the Ministry was creating a panic situation.
The World Bank report on Philippines points out that,
"Private sector projects have not always met the economic qualification
criteria established by Executive order 215. First, none of these projects
use indigenous or renewable resources instead of imported fossil fuels.
Second capital recovery fee charges do not reflect a "cheaper plant investment"
and some are higher than current market equipment costs. Finally, IPPs
prices are neither cheaper nor more fuel efficient than NPC plants, which
is understandable given the time pressure to solve the power crisis."
The Working Group pointed out that,
"For every 1000 MW of Gas turbine based power generation as
envisaged by ENRON project at Dhabol etc. the amount of about 1.5 million
tonnes of oil equivalent would have to be imported per annum. Considering
that petroleum imports is one of the biggest causes of adverse balance
of payment as well as the indebtedness of the nation the wisdom of seeking
such an option needs to be carefully examined."
The Working Group warned that all this would not only distort the fuel
energy balance but,
"the adhoc shifting of fuel energy balance in favour of natural
gas and oil have virtually killed the coal industry in U.K. and depleted
the North sea reserves. Incidentally, ENRON has been the chief promoter
of the change in the fuel balance after privatisation was introduced in
U.K. and plans to do so and worse in India."
As for the second point made by the World Bank report, not only the Working Group but even the Federation of BHEL Executives Association established with concrete data that the "fast track' projects were swindling be country. Regarding the last point the Working Group had pointed out, that in the Government policy there is no effort to ensure technical efficiency.
Interestingly on several points made by the Working Group on Power
Sector, in their letter to the MPs the apprehensions expressed have been
vindicated by the World Bank report on Philippines. These points are
· sensitivity analysis shows much higher cost and prices for
gas turbines,
· the early projects show limited evidence of economies of scale,
· coal-fired generation is least cost source of power, while
distillate-fuelled gas turbines are higher,
· no innovative technologies have been used, all projects provide
conventional technology and, in some cases, the choice of technology is
sub optimal for the purposed type of operation,
· wide price range indicate market power from the sellers side
and
· that while all the risk like market, transmission systems,
fuel costs, foreign exchange, environmental approvals etc. are borne by
the NPC/ SEBs, the risk borne by IPP was directly limited to the project
and that to limited by a 'force majeure' clause.
The Government of India, has chosen to denigrate the country, ignored its capability - the kind of capability that no other Third World Country possess, - the ability to do indigenously every thing from concept to commissioning - planning, engineering, manufacturing, commissioning etc., - and allow the World Bank to treat India no better than Philippines whose entire power system is comparable to that of Bombay or Delhi. Why this was done and for what consideration is a question that the nation expects the Standing Parliamentary Committee, currently investigating the power policy; to examine. Even more cynical, is the fact that the Government of India has taken a 20 million dollar loan to enable the Central and State Governments to engage World Bank consultants to teach India how to turn into a Philippines !
We continue to be the " The 'poor' white man's burden"
What did the Philippines and its people gain out of this and what should
we except in India. The World Bank report states,
"The fact that tariffs will increase during a period of rapid
supply growth, especially from presumably more efficient and cost effective
private sector sources is counter to general expectations of the impact
of privatisation. However, the Philippines experience makes c/ear that
developing countries seeking to devolve responsibility to the private sector
need to bear initially higher costs for several reasons. To begin with
the Philippines had to offer higher returns merely to attract developers
foregoing healthy but lesser returns in the comparative safety of their
home countries. Then, higher returns continued to be needed as the country
sought larger amounts of fresh independent power generation ".
The facts of the comparative safety of the home market" is that in the United States the rate of growth of the power sector, in the next 25 years, is estimated to be 1 % and the investment in the Third World are backed with sovereign guarantees. But, ironically it is the Third World which must feel obliged for the fact that they are being bled by the Multinationals, backed by the United States, the World Bank and IMF in collaboration with the native elite, corrupt politicians and bureaucrats.
And for this what do the Third World countries gain? The World Bank
report states,
" the average price of all IPPs analysed of US $ 0.0652/kwh is
quite high compared to the current average bulk energy tariff of NPC which
includes generation, transmission, subsidies for rural and small-island
consumers, peak capacity, and the provision of reserve capacity.. This
indicates that commissioning of these plants (/PPs) has and will continue
to put strong upward pressure on tariffs".
What is interesting is that the World Bank report states that
" the average economic cost of the IPP is 11 % higher than
the estimated base load avoided cost (i.e., cost to the consumer due to
the absence of adequate service)"
What it means is the economic cost of the power purchased from the IPPs is costlier that the economic cost of having no power. So much for the Minister N.K.P. Salve's claim that no power is costlier than no power.
The Govt. of India, Ministry of Power's estimate is that,
" the average cost of generation from the new plants in private and
public sector cleared for installation is estimated to be around US$0.0762/Kwh"
The National Working Group had pointed out that this policy of the Government
amounts to
subsidy by SEBs to the private/foreign IPPs and
for a contribution of 25 % power generation the IPPs will get
44.5 % of the revenues whereas for supplying 75 % of the power the SEBs/NTPC/NHPC
etc. will get only 55.5 % of the revenue.
The World Bank report states,
"NPC's plan depends on regular tariff increases, continued exemption
from income/ fuel/ taxes, and the expectation that fuel costs and currency
exchange charges can be automatically passed on to the consumers without
political repercussions, suppression of demand, or tertiary consumers resorting
to private generation. The scheduled 10 % real increase in tariffs may
be a small cost to prevent further power shortages and achieve higher reliability.
In current peso prices, however, NPC's whole sale tariff would be 50 %
higher by 1998 than in 1994. Moreover, the tariff increases to retail consumers
would be still greater because of increases in the distribution utilities
spreads".
The consequence of this the World Bank report admits,
"The overall level of retail tariffs in Philippines is by far
the highest in South East Asia, and is second to Japan amongst the Asian
countries; consumers in some of the smaller, poor islands pay nearly three
times the rates charged in Washington D. C. despite substantial subsidies
in the cost of supply. Because retail rates are high, residential or small
business consumers (especially in semi-urban and rural areas) have reduced
their consumption to low and inelastic levels. The ability of the vast
majority of consumers to continue affording tariff increases has already
been stretched. "
The National Working Group had pointed out that even with just the seven fast track projects the average tariffs in states like Karnataka and Andhra would have to be increased by over 60 % for an addition of 30 % power from IPPs. Will not the cost of power in India be several times that in Washington DC once the 100 private power plants, for which-MOUs have been signed, are set up? Will Indian agriculture and industry remain competitive after that ? Will there be power and food riots? The attitude of the present government, industrialists and intellectuals is that of the declining Moguls "Abhi Delhi Door Ast " (Delhi is too far, even as the enemy troops surround the city).
After all, Daddy must keep an eye
Finally, for those who think in political terms, it is worth considering
what Noam Chomsky has pointed out in Deterring Democracy,
" George Kennan, Chief Planning State Department of Policy
Planning, proposed in 1949 that US control over Japanese oil imports would
help to provide "veto power" over Japanese military and industrial policies.
This advice was followed. Japan was helped to industrialise but US maintained
control over its energy supplies".
The process has already began with the Government of India agreeing
submit a periodic progress report to the US Ambassador to enable the US
Government to monitor the progress of power projects. The present Indian
ruling Mafia is ensuring that by bequeathing the US Government "veto power",
the US Government would ensure that not only would their new economic and
power policies be irreversible, but no future Indian Government would be
"allowed" to look for the skeletons in the cupboard ! Since power is a
concurrent subject in the Constitution of India, there is concurrent corruption.
And that is what is called consensus.