 Hello and welcome to NewsClick. Today we have with us Dr. E. S. Sharma who has been one of India's leading energy experts before now fighting various issues on environment, energy, finance and so on. Dr. S. Sharma, you have been with the Air Planning Commission earlier, instrumental on the planning of the energy sector. Do you see that what we see as the crisis of non-performing assets as well as a crisis of the distribution sector is really a much bigger problem of the policies the power sector followed since the mid-90s and subsequently 2003 act where we actually de-licensed the power generating sector? It's a very big problem today, not merely because of power policy but also because of government's policy of pushing banks into lending for crucial sectors like power, telecom, minerals and all that too. Just recall the core sector lending earlier, only with public or government sector. Core infrastructure lending, 2003 I think is a watershed here in the process of economic development of India. There was a laissez-faire policy introduced in power sector generation, de-licensed practically and along with that there was captive coal mining but they opened the floodgates and they said we will allow captive coal mining in the private sector in a big way. So what really happened was that everybody took this as a message, UPA1, UPA2 it continued actually started in 2003 and one interesting thing is the Ministry of Environment for example till 2011 from 2003-2004 they cleared coal based thermal capacity, power generation capacity the total of which was three times the capacity projected as required by the planning commission in their integrated policy, integrated energy policy document. And that itself was actually an overestimate probably that what we will really need by. It was an overestimate because by the time 2003 the thermal generation mix in the power sector was already tilted in favor of thermal. See what really happens in the power sector is roughly about as a thumb rule 50% should be thermal and the remaining 50% should be hydro for meeting the peak demand. Because it's a demand which varies throughout the day. Diarminal and seasonal and all that. Now the thermal power stations cannot be started suddenly and close suddenly. So when they operate, when their capacity mix is very high during off peak hours they remain idle and you will be actually burning coal and wasting energy. Really there was an imbalance. So what really happened in the Ministry of Environment and other agencies with this push, they cleared about a large number of power and mostly in the private sector. The reason why they preferred private sector was the public sector is subject to controller in oil to gel of India audit. And public sector probably they are not amenable to bribe giving kickbacks and all that. So many political leaders preferred giving lands at a very low price and giving them to private companies. And then being able to siphon off the bank loans into equity and into private companies. And I found many cases where I made a formal, a large formal compliance with RBI and SEBI and other regulatory agencies that many of these private companies who took loans from public financial institutions, after all India has got mostly public financial institutions. They took loans and I know one case where the amount is deposited in a foreign account came back through FIPB as equity, round tripped. So this is with public money from the financial institutions which goes out and comes back through government clearances of FIPB back as equity, same money. And the second thing is that I know one case where the private company took huge loans from State Bank of India and other banks. And one whistleblower wrote to me saying that he is an insider of the company. He said this money is being siphoned off. So I still remember I enclosed a copy of that letter sent it to the then chairman of State Bank of India and within a few months again there was another whistleblower that also I sent it. This is almost about seven years, eight years ago, but there was no monitoring. And today that particular private company has become an NPA and they have actually cannibalized some of the equipment. And the joke is that now the proposal is to hand it over to the state government. So this actually corroborates the usual saying, socialize losses and privatize profits. Dr. Sharma, it is even worse than that in this particular case because this is really loot of public coffers as well as the mineral resources which again belong to the people. So a quick recap of this is that the 2003 Act which deal licenses the generating sector. This was something which started with under NDA, Vajpayee's government, continues under Manbohan Singh's government. Both Congress and BJP really supported this. But one of the things that you are bringing out is the reason why this is affected us so badly. One is of course the loot that took place directly, other is by inflating the cost, the cost of power that the consumers have to bear is much higher. And therefore we are also paying not only as a one-time loot but we are going to pay continuously for this shall we say for these policies that we are also paying through our costs of electricity, the loot that has taken place. So actually even today subsidizing that loot. Absolutely. See when the coal-based capacity is almost 70 percent and when they are actually backing down during off-peak hours, in the power purchase agreements there is a clause known as deemed generation clause. That means whether they supply electricity to the utility or not, the utility pays them, only they reimburse the fixed charges. And all that the consumer is bearing. And if you inflate that cost you are bearing then double the capital cost. And then there is over-invoicing. Exactly. See most of this power equipment if you take private companies mostly, there are very often you find over-invoicing. There is a case going on, inquiry going on into one of these over-invoicing but I think most private companies, you will be surprised not only big thermal power projects, even renewable energy based on crop residue, 5 megawatts, 6 megawatts, they opened up the thing in south especially, Andhra, Karnataka and Maharashtra. And I found a number of cases of over-invoicing. We reported this in the administrative staff college. We did a study and we presented it to the Ministry of Renewable Energy. So my point is that the moment the private sector came, there is a regulatory capture. They captured the regulators. And most private companies they got lands very, very cheap. And very often you find illegal land allotments. You know there are wetlands which are supposed to be conserved on the wetland conservation rules. But the Ministry of Environment winked at it and the state governments winked. And you know wetlands support marginal farmers, marginal fishermen. And their livelihoods were lost. You know in many of these power projects, 1000 megawatts or 2000 megawatts, hardly about 900,000 people are employed. That too from outside, skilled people. Whereas about 1000, 2000 small fishermen and small farmers are disemployed. Now when you say that it is getting benefits to the local community, they don't take into account the disemployment and the loss of livelihoods. That's why there's the number of people's moments against these projects. Resistance was there. So many of these projects have landed up in litigation because illegal land allotments, illegal projects. But there is a nexus between most of the political parties and these business houses. Because the business houses actually fund elections. It's well known. And the political parties, they get elected. And then for five years, they try to tweak policies in favor of the business houses. Recovered their houses. Money for the parties. And you know the unfortunate thing is that many of these political parties have taken illegal contributions from foreign companies. And I filed a case in Delhi High Court. I won the case. It went to Supreme Court. And when we were doing all this, the present anti-government retrospectively amended the Foreign Contribution Regulation Act to get out of this, the effect of this judgment. And how do they give this money, these business houses in iron ore exports, other things that is over invoicing? And there are Panama accounts. And the money comes back. And today all that is legalized by this Foreign Contribution Regulation Act retrospectively. Yeah. What was done. And see whatever the human rights violations, they commit some of these companies and the law of the land, they violate. The government wingset them, wingset it. They don't take any action. If we step back a little, the policies you're talking about by which you inflate the capital cost, take loans from the public sector banks, then siphon off the money. All that means also distribution companies get affected because the cost of electricity is high. And there's a political shall be a ceiling above which you cannot charge people for electricity. So the crisis of the distribution sector is also also the consequence of the generating sector. Would that be right? Absolutely. I'll give a very good example. The distribution companies in the public sector bear the brunt. And you brand them as bad utilities. I'll give an example. You take the regulatory framework for electricity. There is a regulator who fixes the price. In fact, in a way that regulatory law was actually processed by me when I was secretary of power. Now, the regulator will say cost plus. But the natural gas which is supplied to the utility, there's a gas-based power plant and that gas-based power plant supplies electricity. Now, whatever is the cost plus, the price goes to the consumer, electricity consumer. But the person who produces the gas, there is no ceiling on the gas price. I mean, you know the case of Krishna Godavari Basin and I filed a case in the Supreme Court against a reliance company. I think Gurudasaraskarpta and I, we are co-operationalists in that case. So there what happens is the production sharing contract itself, the questions of the implementation. And you know, $4.2 per million BTU was the price fixed. Whereas the same company quoted $2.34 per million BTU to NTPC and international tender. So we said, look, that is the discovered price. Whereas the government, you know, discovered a new kind of a formula to give $4.2 and as though that is not enough, the company said it must be doubled, $8.4. So luckily that did not happen. Now take the example of, take the example of, you know, the cost of production of gas, Krishna Godavari, probably will be about 60 cents per million BTU. So if you take 60 cents and 70 cents, 4.27 times. Now you take the case of a former who produces Padi in Krishna Godavari, same Krishna Godavari Delta and he produces Padi, which is the lifeline of the economy of Andhra Pradesh. And to give him a MSP, a minimum support price, a 15% over that, the government thinks it's a great charity. Swamnadan committee suggested that you should take the land value and other things and then 50% more than that. Till today, despite all the promises, that kind of MSP, Swamnadan commission recommendation is not accepted. Even that 50% compare it with natural gas, it is seven times. So when it comes to natural gas and a private company, you're prepared to give them seven times. When it comes to a former who is toiling hard, who takes, faces all the risks, he gets hardly 15%, 20% over the cost of production. So this is the kind of crony capitalism that we are observing in the world. In the electricity generating sector and the distribution sector, do you think a time has come for us to relook at what would be called not reforms of the electricity boards, but actually reforming the electricity boards again, combining the generating and the distribution sector transmission, in any case, has always been with the government. It's nobody's going to invest in transmission otherwise. So do you think we have, we should come back a full circle and say, this is now public infrastructure clear, is being funded by the people, it's lifeline for the industry, agriculture and the domestic consumers, and all this experiment of trying to make it quote, unquote, more efficient by deep bifurcating, trifurcating the electricity boards have failed. And we are doing this mess right now. Certainly, because the infrastructure sector like electricity, there are two things in that. One is there is a natural monopoly, very difficult, it's not amenable to market kind of competition. The second is the very lumpy investments. See, lumpy investments in India, the moment you give it to private sector, it fails, the government has to take it over with all the liabilities. I mean, you take the case of an airline today, the company is unable to pay salaries to its employees, a private company, whereas you want to privatize Air India, and I traveled Air India today, and it's such a magnificent airline. In fact, my wife sent a note to the captain, saying, we are proud of you, and I wanted to add one sentence, I hope they don't give you the Hindustan aeronautics treatment. I firmly believe that infrastructure sectors like electricity and some of these airports and all that, they should be in public sector for one reason, it'll be transparent. It's amenable to controller and auditor general of India audit. It's amenable to public scrutiny, and in India, somehow the private sector is more crony capitalist than a private sector which is prepared to face competition, and very often our regulators are not independent, because most of the regulators in India, they're all political appointments. Pollution control boards, I've not seen a single industry polluting heavily being closed down, because pollution control boards, all these chairman members are all appointed by the political executive, and the political executive is actually literally a puppet in the hands of these business houses because of this nexus. See, that's a bigger story. How do you do regulation? Because this is not an issue over here, it's an issue everywhere, including the United States, and of course, as you know, Trump has defanged or dismantled the environmental protection over there, which also George Bush had done. So we are facing a much larger issue of how do people control, essentially, various things which impact them in direct or direct ways. But you know, there is a difference between the United States and India. Give the example of a health minister, the health secretary of the United States, chartering a jet and traveling. And I don't think the government really questioned. It is the people who questioned. Newspapers, you know, media questioned. So when this happened, ultimately, he had to resign. We have political leaders in India who travel in private jets. And some of us questioned, but not much happens because very often the press, they're afraid of the political leadership. Given what has happened in the terms of the regulatory disband link, I think we have a much larger issue. Coming back to this issue, what you said, that we should take now with the crisis of the electricity sector, both generation distribution, the NPS, we really should not look up what it is just a financial issue, but a much larger policy issues of energy. And you also raised the issue of coal, mining, mineral resources. So we need to really take a look at what was started in 90s, what Mohan Singh said, liberating the animal spirits of Indian capital, that the liberating those animal spirits have really hit us very hard. Very hard, very hard. And see, India's economic development would not have taken place, had not Nehru and those visionaries allowed the public sector to step in. We used to have small licenses and they were not prepared to go out and identify. Five megawatt, 10 megawatt, that's just due to the past situation. And then once the state electricity boards were set up, they went into remote areas. So I think India is probably, we have to revisit the whole thing and public sector must be strengthened. It's not only in electricity, in airports, everywhere. For example, in Andhra Pradesh, we got Visakhapatnam airport. And the political leadership is very keen on giving Bhagapuram airport, displacing people over 3,000, 4,000 acres, fertile land, lush green fields forcibly. And then the Land Equation Act of 2013 had some progressive elements, like participative decision making, food security, you know, and consent of 80% of the people. Now the government after government, state governments, they've taken cue from Gujarat and they're amending the act to make it completely, you know, absolutely no participative decision making at all. Real estate development in the name of airport, et cetera. And all around airport, you find land being purchased and compensation pocketed by absentee landlords and are mostly political leaders. And the real person who tis the land has not got anything out of that. I deal with those things in my area. So I think, you know, India should, public sector is going to stay in India. Any government worth its salt should actually strengthen public sector, should not erode its credibility. They must go all out. And India's, I think, future depends on the public sector. I'm a firm believer in public sector. They've done a great deal. And I think that is something which is very important. Thank you very much, Dr. Sharma, for being with us. Hope that we'll be able to catch up with you on different points of time on all these issues that you've talked about. It's also, I think, important for our listeners to know, viewers to know, that the 1948 act, which was the original one, was passed by, placed in the parliament by Dr. Abhidkar. And it had fundamental issue of equity built into it, not profits, but equity for the people of India. And I think we need to revisit that, as Dr. Sharma has said today. Thank you very much. Do keep watching NewsClick and also visit our website.