A time has come when WE the people should demand a satisfactory answer from the "reformatory" Governments and the World Bank to the question - REFORMS IN THE POWER SECTOR WHY? and FOR WHOSE BENEFIT?

 The reforms and consequent restructuring being attempted in the power sector (including the introduction of private sector and more specifically the multinational sector), is itself a sequel to "globalisation and the liberalisation of the economy" that the World Bank, IMF and the WTO (working in tandem) are imposing on the Third World and its people. In the Third World changes are based almost entirely on studies and recommendations made by self-serving World Bank consultants who are generally foreigners and almost always chartered accountancy firms with no experience of the power system and/or the society and social concerns of a particular nation. The entire exercise of restructuring in a vital infrastructure industry has been reduced to a financial exercise from the point of view of the movement of global capital. The focus is on how to raise foreign investments for the power sector and these consultant's reports are on how to ensure foreign investments, what comforts and concessions need to be given etc. None of the reports have considered what would happen to the power system, the existing institutions built up over decades, the various classes of consumers, the nation and its people nor on how to improve the efficiency of the electrical power industry (except in financial terms like profit maximisation). With such an obvious bias, the recommendations are not likely to result in the most efficient method for restructuring the power sector.

 Another issue of vital public concern is that notwithstanding the fact that the electrical power industry has tens of thousand of billions (in whatever currency) of indigenous investment and millions of consumers and employees, the entire exercise of restructuring is being carried out in the Third World without either information in the public domain or public debate. Coerced by the World Bank all manner of policy decisions are being taken on a piecemeal basis without even analysing the consequences.

 Indeed up until the seventies and even early eighties the World Bank financed the development of the infrastructure - including the building of electric power capacity - through soft long-term loans given by the IDA. Under President Regan the World Bank's philosophy underwent a dramatic change, and the World Bank today literally forces all aid receiving countries to a) privatise the power sector and b) encourage high cost foreign investors in power sector with guaranteed returns.

 Several questions beg for answers. For example, what would be the long-term policy with respect to privatisation of the electrical power industry? Would profit maximisation be the main objective? Would independent power producers be allowed to sell power directly to select consumers? Would the State Run Electricity Undertakings be handed over to the private sector at some book value? Would the market dictate tariffs or would tariffs be based on profits guaranteed to the MNCs or would they be based on the people’s capacity to pay? Who would provide the subsidies for those living and operating at the margin? Would the people be given a choice between affordable power with power cuts during peak hours and high priced un-interrupted and reliable power?

 Redefining the Role of the State

The World Bank advocates that governments must demonstrate strong political leadership and commitment to bring about changes in institutions and regulation of their power sector. Further, that governments must decide on the best institutional means for separating their ownership responsibility for state-owned utilities from the responsibility for formulating policies to develop their power market and for regulating the power market.

What the World Bank is prescribing is not that the State should retreat but that the State should redefine itself as the protector of the foreign investor. The State should provide guarantees and counter guarantees for the profits and debt repayment of foreign investors like Enron. That the State should set up Power Trading Corporations and arrange for the sale of power generated by mega power plants owned by foreign investors and based on load guarantees. Government must provide tax and customs concessions to foreign investors; it must arrange funds from local financial institutions. Every institution of the State should ensure the success of private capital at the cost of stranded public investments. An example of this new pressure is that the State owned Power Finance Corporation (PFC) which was set up to provide credit to the State Electricity Boards (SEBs) now provides only 12% to the State Electricity Boards, the balance 88% is now reserved for the private investors (IPPs or more precisely foreign investor power plants FIPPs). And even for this 12%, like the World Bank, the Chairman PFC places conditionalities, "PFC will give all out support to the State Electricity Boards going in for privatisation of distribution"

Another characteristic of ex-colonial developing countries is that the entire establishment wilts under the pressure of the World Bank and the MNCs. A couple of examples would illustrate this.

• Under Section 29 of the Electricity (Supply) Act 1948, the Central Electricity Authority (CEA) and CEA alone has a statutory obligation to give techno - economic approval of power projects. However, for the first time since independence, and in clear violation of the law, in the Dhabol Power Company (promoted by ENRON) case, the minutes of CEA clearly establish that CEA was forced to give technical clearance. Minutes of 118^th meeting of CEA Dated 12. 11. 93 ( Para 1.1) states

• The Secretary, Civil Aviation, in his submission, on 9th June 1993, to the Standing Committee of Parliament admitted that contrary to the law air taxis were operating "Scheduled air transport services" a statutory monopoly of the Indian Airlines. And in defence the Secretary added "How does one know about it in the Ministry unless the facts are brought out that somebody is violating the law?" (Report: 1993 Pr. 2.1-2.2)

Both the illustrations suggest that while the political and bureaucratic establishments in the Third World Countries are constitutionally charged with the obligation to enforce the law they do not hesitate in violating or manipulating the laws of the land to accommodate vested interests.  

It is only appropriate that the Electricity de France in a round table with the World Bank on "Power Supply in Developing Countries: Will Reforms Work" has stated, "Modern economic theory tells us that competition is more difficult to introduce in network infrastructure than in other industries, and more difficult in electricity that in other networks. It is odd that the World Bank derives no consequence from this, and treats electricity as any other commodity…. We also know that competition does not streamline regulation but makes it on the contrary more complex and burdensome. Introducing competition creates a "half-free, half slave" sector…. Marginally, the idea beyond our discussion about privatisation and competition may be to open the power sector of developing countries to foreign operators, expertise and capital…."

 3.0 Objectives that most Third World power sectors have sought to achieve are:

1. To provide the industry with power at affordable rates in order that the industry may be competitive.
2. To take electricity to rural and urban slum areas and provide electricity to the economically disadvantaged irrespective of their capacity to pay.
3. To encourage and build self reliance
4. To ensure regional co-operation in a complex plural society within a situation of shortage of capital and resources.
5. To support the growth of industry, rail transport and communications.
6. To optimally utilise domestic primary energy resources.
7. And in the case of India, to make electricity a backbone for food security- based on electrical irrigation pump sets - especially after having to live from ship to mouth under the PL 480. Failure of this industry will result not only in a power crisis but also a food crisis.

 These objectives continue to be valid today. Any policy decision that would lead to any disruption in the fulfilment of these objectives would cause a setback to every economic activity.

 4.0 Objectives on the other side

1. To enable multinationals corporations to take over the assets of the Third World.
2. To build large multinational corporations that can effectively control the entire energy system of the World.
3. To ensure that the State is demobilised and the entire fund requirement in this capital-intensive industry is based on and controlled by international finance capital.
4. To maximise private profits
5. To remove the distinction between power equipment manufacturer, fuel supplier and consultant by making them all equity holders of Independent Power Plants (IPPs). For example in India Enron-GE-Bechtel together formed the Dhabol Power Company.
6. To provide this essential public service only to those who can pay
7. To make energy a borderless flow system that does not respect national boundaries and only respects the flow of capital, and finally
8. To ensure political control of the developing countries by the powerful industrial nations

5.0 An examination of the restructuring of the power industry - experience since 1991.

In order to understand the problems and World Bank inspired solutions there is a need to be aware of the following facts:

• Three fourths of India is arid. The consumption of electrical power as a percentage of total power consumed in Agriculture has gone up from 5.37 % in 1950-51 to over 50 % in 1995-96 and during the same period animal draft power has gone down from 56.75 % to 12 %. This implies that the agricultural economy of India (and the food insecurity of nearly one billion people) is dependent on electricity for the effective use of available ground water.
• Besides agriculture the rural economy accounts for 53 % of the total employment in manufacture, 71 % in construction, 47 % in transport and 45 % in trade.
• Political power, particularly at the state (provincial) level rests with farmer’s lobby.
• India has a large section of small and middle farmers who can barely make two ends meet.
• There is no `social security’ either for the marginal farmers or for farm labour.

The above factors contribute to the crisis, as well as the dilemma, of the electrical power sector industry. These factors are responsible for

• Political enforcement of irrational and low tariffs for supply to the agricultural sector.
• Consequent violation of the law (section 59 of the Indian Electricity (supply) Act 1948, which requires that Government should ensure that the State Electricity Boards have a minimum overall return of 3 % on capital invested, after all cost are met)
• Resultant resource crunch and the World Bank enforcing the TINA (there is no alternative) solution of inviting foreign investments on exorbitant terms and conditions, undermining the established power supply and equipment manufacturing industry.

Now we may examine the consequences of reforms against the World Bank claims (of would be the achievements of reforms and restructuring of the power sector)

• significant indications that electricity prices will be lowered due to restructuring.

Electricity prices would in fact increase many folds as a consequence of restructuring. That is the recommendation of the consultants appointed on the recommendation of and with the loans given by the World Bank. One such recommendation on tariffs increases given by the consultant - Putnam, Hayes & Bartlett Inc for the province (state) of Uttar Pradesh is:

Domestic 549.6

Agriculture 612.8

Commercial 155.0

Public Water Works 254.7

Public lighting 420.7

Industry 74.5

Public Water Works 202.9

Industry 16.5

Railway Traction 14.5

All this was to be achieved between 1994/95 and 1999-2000 at 1994 constant prices.

(While the Government of Uttar Pradesh has denied any intention of raising the tariff, it is trying to dismantle the State Electricity Board and privatise parts of it. It is only the stiff resistance put up by the employees and engineers that has so far not allowed the dismantling)

Before the reforms, the postal stamp rate of power transmission was around 1 paise (one hundredths of a rupee) per unit when generation and transmission were integrated under the National Thermal Power Corporation (NTPC). Since the separation of generation and transmission and the creation of Powergrid Corporation the rate has gone up to 10 paise per unit. Currently the Powergrid is seeking to increase the tariff to 50 paise per KWH.

In the Philippines, the World Bank had dictated restructuring before it did in India. Extracts from The Philippines: Power Sector Study - Structural Framework for the Power Sector, World Bank, Industrial and Energy Operations Division November 30, 1994 are quoted below. The World Bank report states that

What it means is the economic cost of the power purchased from the IPPs is costlier than the economic cost of having no power. The World Bank report states further that

In terms of capital costs a single example would suffice. Two coal based power plants 2 x 500 MW are being set up at the same location and at the same time (starting now). The capital costs are as follows. The Foreign Investor Power Plant (FIPP) being almost 41% costlier.

Capital cost Rs Million/MW 40.8 57.4

(US $ million/ MW) 0.9488 1.3348

@ National Thermal Power Corporation with equipment to be supplied by Bharat Heavy Electricals Ltd both owned by the Government of India.

** National Power and Hindujas of U.K.

• financial and operational flexibility.

Most of the Foreign Independent Power Producers (FIPP) have insisted and obtained post tax return at 16% (in whatever currency in which the debt and equity was brought in) for a normative generation of 6000 hours (or 68.5 % PLF). Generation above the norm earns an incentive capped at 0.7 % points for every additional 1% of generation. In addition they have insisted and obtained load guarantees of 80% and 90% irrespective of the system PLF. Thus, both financial and operational flexibility has been jeopardised. In the case of Enron, even the World Bank opined that what Maharashtra needed was peaking power and not such a large "must run" base load station.

• maintaining the economics inherent in the existing structure so as to ensure that the benefits of the past investments do not result in stranded investments.

The entire thrust of the World Bank has been that the only way to resolve the problems of the State owned Electricity Boards is to dismantle them and privatise them at all levels. The injection of high cost power and the inability (political as well as social) to increase the tariffs compounded by "refusal" to make any reforms in the State Electricity Boards (even to the extent of reducing the interest burden on the Boards by creating an equity base) has resulted in the rate of return of the State Electricity Boards deteriortaing from (-) 12.7 % in 1992-93 to (-) 18.7% in 1997-98. (All this inspite of a statutory obligation under Section 59 of the Electricity (Supply) Act 1948 requiring that the State Government ensure a minimum rate of return (ROR) of 3 % on their net fixed assets in service after providing for depreciation and interest charges. It is almost certain that the State Electricity Boards will collapse)

• fairness and equity

While foreign funded Independent Power Plants and equipment suppliers are given guarantees and counter guarantees, indigenous organisations like the State owned Central Public Sector Undertakings - the National Thermal Power Corporation (NTPC), equipment manufacturer Bharat Heavy Electricals Ltd. (BHEL) and others have to fend for themselves.  

Should Dhabol Power Co (DPC) (promoted by fuel supplier ENRON, equipment supplier GE and consultant BECHTEL) provide power directly to the consumer at the rate at which it has been contracted it would not have been economical even for the highest paying segment, large-scale continuous industry. What the MSEB is doing is purchasing the entire power from DPC, subsidising it and then selling it. While the World Bank considers agricultural power subsidy "non merit", "merit" is found in subsidising the foreign private power producers.

The Independent Power Producers (IPPs) have no obligation whatsoever to provide for reserves. (Reserves are akin to the RBI holding gold and other reserves to protect Indian currency from fluctuation). This responsibility and cost of providing reserves is entirely to the account of the State Electricity Boards. (Multiplicity of agencies would certainly increase the quantity of reserves required)

• responsible and efficient use of resources.

Before the restructuring of the industry, power development was based on the optimal use of indigenous fuels, notwithstanding the fact that India’s resource endowment was not very favourable. Either the coal had high ash content or the hydropower resources are far from the load centres.

However, the Independent power plants for which Memorandum of Understanding - MOUs (i.e., a agreement between the Government and private sector companies (mostly MNCs) based negotiations and not competitive bidding) have been signed are based on imported fuels (Enron - LPG; Cogentrix - imported coal). The consequences of this on future balance of payments do not seem to be of any concern. To understand the implications of this it is important to realise that in 1997-98 a fourth of total Indian imports were petroleum products and crude oil. To this will be added the import bill of the power sector. In 1997-98 India's trade deficit was 3.9 % of the GDP and at the end of March 98 the external debt was 23.8 % of the GDP.

• the ability to be judged "achievable/ implementable" in the near term.

The track record of the achievements of the projects for which MOUs have been signed suggest just the opposite. Worse still, not only is there no progress in the projects but even the normal advance action taken by the State Electricity Boards have come to a stand still. The average capacity addition achieved during the Eighth Plan (1992-97) worked out to 3284.5 MW per annum against the target of 6107.6 MW. During the first two years of the Ninth Plan 1997--98 and 1998-99 the achievements have been a capacity addition of 3226.5 MW and 3300 MW respectively against a target of an annual addition of 8094 MW.

Since 1991 when the private investment in power plants was invited, 120 bids (95 projects aggregate capacity of 48,137 MW awarded through Memorandum of Understanding route and 32 projects aggregate 20,697 MW awarded by international competitive bidding) offering to set up 75,000 MW were received, the actual completed projects as on December 1998 were only 1,589 MW.

In this capital and technology intensive industry, if spares and services are not ensured the power supply would be jeopardised, causing immense damage to the entire economy. It is worth stating that control of energy as a mechanism for controlling nations is the stated policy of the USA. It is worth considering what Noam Chomsky has pointed out in his book -Deterring Democracy,

6. Regulation - imposing a western concept

The concept of a "Regulatory Authority" applies in a fully functional market economy, where the need to protect the interest of consumers becomes paramount when supply is either through a monopoly or oligopolitic. In a country where there are shortages and a majority of the consumers are subsidied by an agency of the State there is a need for other patterns of accountability of the State monopoly.

Barely a month prior to a session of Parliament, an Ordinance is passed purporting to introduce certain highly controversial, and fundamental changes in the working of the electricity industry. In Andhra Pradesh the entire opposition was expelled, to enable the ruling TDP Government, to amend the structure of the State Electricity Board. By Western standards these practices are unacceptable in a democratic polity. But as far as the World Bank is concerned, in the Third World, this is an acceptable pattern of governance.

In India, the World Bank demanded that the existing regulator - the Central Electricity Authority (CEA) should be made redundant and replaced by Independent "stand alone" regulators - Central Electricity Regulatory Commission (CERC) at the national level and State ERCs at the provincial level.

Central Electricity Authority was a unique organisation comprehensively involved in:

• Planning for power development.
• Design and technology development.
• Techno-economic appraisal of projects.
• Construction and plan progress monitoring.
• Operation monitoring of power plants.
• Technical consultancy.
• Monitoring the performance of the State Electricity Boards.
• Power policy formulation.
• Grid management

In order to discharge these functions some of which were regulatory, some advisory, some innovative, some consultative, CEA was organised in such a manner that there was complementarity between the various responsibilities and functions. CEA had been working with the entire industry in a participatory mode. The operating philosophy of CEA had been that in a developing country like India, expertise would be scarce and it should be shared with the entire industry in areas of project formulation, project operation and advising on techno-economic aspects. CEA’s approach of constant updating of its technical skills through continued involvement with designs enabled it to independently plan and appraise projects without depending on any other agency. Since electrical power has no finished goods inventory meticulous and advanced planning is the only method of avoiding blackouts or revenue loss. And in a capital scarce developing nation a situation of acute power shortages can only be minimised or eliminated through planning. In that sense planning becomes an integral part of regulation but that is not the concept of the World Bank.

The CERC and the SERCs are meant to consist of retired Judges and bureaucrats as the members and their objective would be to ensure a - level playing field for private capital. What the World Bank means by this is

• That investors must be able to see that regulations are not applied arbitrarily.
• Ensure that parties to contracts have the confidence in the fairness and predictability of the contract application.
• Allow investors to see their risks clearly and make provisions to mange them.
• Protects investors from political manipulation and technical incompetence evident in most developing countries.

Another aspect that needs consideration is that India is very large and there is tremendous diversity. The availability of fuel and hydro power is in some provinces, load density is also not uniform. The power plants set up by the Government of India have a predetermined share for the different provinces (states). Also flow of electricity from one province to another is required to meet temporary shortages. This required Regional Electricity Boards (REBs) besides State Electricity Boards (SEBs). While the later are statutory the former are voluntary. That is through a voluntary and participative mechanism the REBs were an inter-province regulatory mechanism. Under the World Bank model there is no concept of regional regulation, nor is there any place for participatory voluntarism. There is either SERC (State or provincial Regulatory Commissions or National level CERC (Central ERC). The only regional dimension is to be provided by the Power Trading Corporation (PTC) which will buy bulk power (on a take or pay basis) from the mega power plants that would be set up by the MNCs and hawk it to the various states. Incurring transmission losses, providing for reserves and taking all commercial risks shall of course be the privilege of the Power Trading Corporation which will naturally be owned by the Government of India.

Premise 1: that the present legislation has been unable to prevent political interference in fixing tariffs and therefore a Regulatory Commission is essential to enable tariff amendments. And of course the "There is no alternative (TINA)" syndrome - the only way to ensure growth in the industry.

Fallacy: The extant law has not inhibited any Chief Minister from violating it with impunity. Somehow it is now expected that this highly political issue of tariffs would be resolved and the necessary political will generated merely by setting up Regulatory Commissions with the power to fix tariffs - guided by "the principles under Section 46, 57, 57A and 59 of the existing legislation"! Within the framework of the existing laws, the Andhra Pradesh Electricity Board could have meet 84.3 % of its capital budget from internal resources against the present dismal situation of meeting 25.65 % provided the existing law had NOT been violated, the SEB restructured with a 1:1 debt equity and a 16 % Rate of return is allowed. The Government of Andhra Pradesh has willingly granted almost a 30% internal rate of return to the private investors (MNCs), while violating the law that requires that the SEBs be ensured a 3 % rate of return.

Premise 2: regulation in an on-line continuous industry is possible without a market mechanism.

Fallacy: In the foreseeable future, there would only be shortages (at least during peak hours) that would preclude the creation of market instrumentality of spot purchases or competitive purchases of power. There is no likelihood of a "competitive market for power". Thus regulation of a very complex on line industry (electricity industry is an on line industry where electric power flows according to the laws of physics and not the directives of a commission) is to be achieved through the instrumentality of a regulatory commission without the corrective signals of a market.

The SEBs are and would continue to be under the control of the State Governments, while the private players would be governed by fixed contracts (which can only be arbitrated in England and under the English law!). What is not clear is what will the regulatory commissions regulate. Will they have the power to open the one sided PPAs? Will they prevent MNCs to control not only independent power plants but also distribution agencies and thereby create private monopolies?

Finally, the Regulatory Commissions would have no accountability whatsoever. They, like the World Bank (which has inspired the reforms) are accountable neither to the legislature nor the public nor the market (since it does not exist). There is only a wishful prayer that the Commission "shall ensure transparency" That too, in an industry where a variation in the tariff per unit of a tenth of one paise (or one cent) implies Rs.70, 000 (or $ 70,000) per MW per annum (at 80 % load factor). It would be easier for the private sector to make money through favourable decisions from the Regulatory Commissions than by performance or improvement of efficiency. Thus the Regulatory Commissions will be controlling revenue of utilities worth thousands of billions per annum without any accountability, checks or balances! Since MNCs have very vast political, economic and international clout would they be able to "regulate" the Regulator is a very important question in the Third World countries prone to political and administrative corruption.

We conclude this section with extracts from a letter written by a few former Chairmen of the CEA (Messers S. N. Roy, A. N. Singh, M.K. Sambamurthi, Krishna Swarup, J.K. Bhasin and N. S. Vasant addressed to the Prime Minister - dated 27.5.1997.

6. Conclusion

When new ideas, concepts and institutions travel from the Industrially developed to the developing countries, the profit seeking MNCs and the corrupt politicians and bureaucrats of the developing countries ensure that cost and tariffs go up. An example of this nexus is the reforms being made in the power sector. Whereas the independent power plants (IPPS) were introduced into USA as a result of the PURPA law to provide competition to the utilities, in India they are parasites that seek guarantees and counter -guarantees to ensure almost a 32 % internal rate of return and load guarantees of almost 85 to 90 % PLF. While the World Bank propagates competition any hope of introducing the concept of economic load dispatch is lost on account of these guarantees. Also the positive discrimination that the World Bank demands for the foreign investment against native investment resembles the earlier era of colonial rule. What is amazing is that the developing countries have to take a loan from the World Bank to hire highly priced consultants to teach them how to auto-colonise. For example, India has paid a huge amount to lawyers and consultants to teach the Electricity Boards on how to make one-sided Power Purchase Agreements that are sure to drive them into bankruptcy.

Restructuring suggests that except ensuring high returns on investments to the foreign investors (and massive kickbacks for some natives) nothing else would be achieved. The only conclusion that can be drawn is that trade unions have no choice but to organise the workers and the consumers to defend the electricity industry, which started as a curiosity at the beginning and has become a necessity by the end of the millennium.

Note on impact of power reforms on the indigenous manufacturing industry.

Power equipment is very capital intensive. It is dominated by powerful Multinational Corporations (MNCs), which often form cartels (there have even been convictions under the US Anti Trust Act). These MNCs are mostly in the G-7 countries and have the effective backing of the World Bank, OECD, OECF, their home Governments and financial agglomerates. The market for electrical power equipment in the developed countries is effectively protected; the market in the developing countries is therefore the major target for the MNCs. The only country having an indigenous manufacturing industry and not protecting it is India. Bharat Heavy Electricals Ltd. (BHEL) is not even backed by its home Government (the World Bank study on Capital Goods indicates that there is negative protection for BHEL).

India offers one of the largest markets and also provides a base for the South Asian market, which is at present the largest unprotected market. (To get an idea, the Indian market is one and half times the size of the combined market of 14 Middle East and West Asian Countries put together; it is larger than the combined market of the eight East European nations or the combined market of 13 Latin American nations; it is larger than the combined market of 51 African nations; it is larger than the entire market of Western Europe excluding UK and Germany) 

Paradoxically, BHEL located in one of the largest markets and ranked 12th amongst the 15 odd comparable enterprises is faced with a recessionary situation. This is because the Indian market is intermediated by the source of financing. (For example, bilateral credits imply import of equipment; multilateral credits imply international competitive bidding; credit from Germany explicitly stipulates import from Germany, Japanese credit is more discrete and ensures a reasonable share for the Japanese industry).

Since, the equipment is tailor-made, specifications are often manipulated to make them suitable to only one or two manufacturers. Another device is to stipulate conditions of technical and financial performance. The pricing of power equipment is arbitrary and is manipulated by equipment manufacturers (the same equipment would be priced differently for different countries or for different customers) by various means including large kickbacks.

The changes in the power policy essentially imply the following:

1. Direct access for MNCs into the Indian market on most favourable terms.
2. Withdrawal of State intervention and budgetary support.

Since the FIPPS/IPPs are hedging their risks with guarantees/counter guarantees and /or escrow accounts, these would be the first charge on the revenue of the SEBs. this would be followed by establishment charges. All other equipment and energy/service providers would have to await payments. Since the SEBs are making commitments for purchase of high cost power from FIPPs/IPPs without increase in tariffs, it is obvious that the disposable funds will shrink. This would increase, the already large outstandings, to alarming proportions and create serious problems of liquidity for the Central Public Sector Undertakings. That would eliminate their ability a) to raise funds from the market, b) to make any financial offer such as suppliers' credits. In fact many of them would not have funds even to mobilise raw material /labour and future investments including modernisation. Besides the problem of liquidity the indigenous equipment manufacturers should be able to raise funds to provide credits for both the indigenous market as well as for the export market.

Inspite of meagre spending on R&D (refer to Table 1), it was possible for BHEL to remain technologically contemporary since BHEL was able to exchange the protected Indian market for technology. Now the MNCs have direct access to the Indian market where it becomes a competitor therefore, BHEL faces the prospects of technological autarky, ironically in the name of globalisation. BHEL is now compelled to form Joint Ventures (one with GE and another with Siemens are in progress) where BHEL will essentially be providing cheap Indian skilled and unskilled labour with the other partner providing equipment and technology. 

Thus denied of market, technology, finances and lack of cohesion in managerial control enterprises like BHEL will effectively cease to remain Indian organisations serving Indian interests. They will then be resurrected as ancillaries of MNCs, who are desperately in need of a base for their Indian and South East Asian operations.

_______________________________________________________________________

Enterprise R&D expenditure as % of sales

US $ million %

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Hitachi 5522 4.0

Siemens 4844 8.9

Alcatel-Alsthom 3033 9.7

ABB 2353 7.9

Mitsubushi 1865 6.5

MHI 1315 4.2

GE 1176 2.0

GEC 644 4.0

Westinghouse 262 3.0

_____________________________________________________________________

Source: An analysis of principal manufacturers of electrical equipment and their market - 3rd. Ed. ABS Market Research and Publishing, UK.