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Privatization of PowerSector
Concerns and Prospects By
R K Krishna Vazarpu- 0409005
Pankaj-0409008
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Introduction
India is the world's sixth largest consumer of energy andhas formulated plans and strategies for major energyinfrastructure developments in order to keep up with the
increasing energy demand as the country becomes moreindustrialized and the economy expands.
Privatization is the incidence or process of transferringownership of a business, enterprise, agency or publicservice from the public sector (government) to the
private sector (business).
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Scenario Of Power Sector Before Liberalization
After 1947, all new power generation, transmission anddistribution , came under State Electricity Boards(SEBs).
The Ministry of Power in the Central governmentformulates the policies for the power sector.
As per government guidelines, all power projects above acertain capacity have to obtain techno-economicclearance from CEA before they can be implemented.
National Thermal Power Corporation (NTPC), National
Hydro-electric Power Corporation (NHPC) and PowerGrid Corporation Limited (PGCL) were formed by thegovernment to assist in meeting the increasing demandfor electricity throughout the country.
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Scenario of power Sector After
Liberalization A new policy of opening electricity generation to private
participation was announced by the Central governmentin October 1991
Private party participation was invited.
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This act is likely to benefit theIndustrial Consumers ,IPP, private
utilities and power equipmentproviders.
The Act creates a liberal andtransparent framework for
power
Entry barriers removed / reduced
Generation de-licensed
Freedom to captive generation,including group generation
Recognizing Trading as anindependent activity
Electricity Act2003
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Open access in Transmission
Multiple licenses in Distribution
The act allows direct selling of power to industrialconsumers.
The power producers need not sell to the bankrupt (SEBs)rather than sell it to a worthy customer
100% FDI generation, transmission and distribution is
allowed
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Reasons for Disinvestment in Power Sector
To promote increasedefficiency
To raise revenues for thestate (and thereby to
bridge fiscal deficits).
To reduce governmentinterference in the
economy and promotegreater private intiative.
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Problems faced by private Sector
Problems mentioned by private producersLitigation/renegotiation leading to delays .
Financing problems
Risk sharing
Fuel-supply risk
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Benefits Of Privatization
Stops loss-making SEBs from adding to government debt. Depoliticizes SEB, remove governmental pressures for
over-manning and the sub-optimal use of resources.
Gives new owners a strong incentive to turn around failing
SEB into successful businesses. Gives new businesses access to investment capital that
government cannot provide.
Raises more money for government through taxing formerSEB.
Expands an enterprise and an industry, in the long runcreating more jobs and generating wealth for thecountry.
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Major power Company in India
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