It has to be curious that, despite being so cash-strappedat least till the latest bailout package was put in placenot a single state electricity board (SEB) has delayed payments for power purchased to the public sector NTPC. The SEBs, as their budgets show, often dont get their subsidy payments from the state governments in timesubsidised supplies to farmers are to be met from state budgetsand their power costs are soaring ahead of their realisations, but they pay NTPC not just on time, they do so before time. Why? Because, as part of the Montek Singh Ahluwalia bailout scheme a decade ago, a tripartite agreement was signed to fix the problem of outstanding duesunder the agreement, if an SEB failed to make a payment, NTPC simply had to request RBI to release the amount and to deduct the money from the states balances. Over the decade,
NTPC has had to approach the finance ministry on just a few occasionseach time, the payment has got made. At a time when the private sector is increasingly supplying so much power, it is important to extend this arrangement to it as well. After all, there is no justification for protecting an NTPCs interest while not doing the same for a Tata Power, for instance. Apart from the fact that the distinction between the private and the public sector is rapidly getting extinguishedin the sense less people fly Air India or dial BSNL/MTNL than they do their private sector counterpartsit is worth keeping in mind that if a Tata Power doesnt get its money, the PSU banks it has borrowed from dont get their payments.
A proposal that the power ministry is seriously considering, reported in FE today, is more worrying. In a bid to make the power sector more efficient, the government had mandated what is called a merit-order dispatch systemput simply, it means that if 5 companies are lined up to sell their power, the lowest-cost power will be dispatched first. Given that NTPCs new plants are fairly costly, this puts them at a potential disadvantagein a power surplus situation, for instance, this could mean that buyers will not take electricity from these plants and may, instead, buy from even new private sector power plants that are more efficient. So, the power ministry is considering a price-pooling mechanism whereby power costs are pooled for all NTPCs plants. If this is done, it will