Power solely in Central list suggested to attract FDI

NEW DELHI, MARCH 26. With States failing miserably on the power sector reforms, leading foreign financial institutions want the power sector to be removed from the concurrent list to the Central list as in the case of the telecom sector in order to attract investments.

"Power is a concurrent subject. This results in inordinate delays as developers are caught between politics of the State and Central governments. Constitutional amendment should be sought to make power only a Central subject," ABN-AMRO Bank said in a presentation to the Union Power Ministry on 'Measures to attract FDI in power sector in India.'

Making a case for power to move to the Central list, the bank gave the example of the telecom sector that has attracted the highest FDI in the post-reform era.

"A uniform Central policy will enable a smooth and efficient transaction process for all parties concerned," DSP Merrill Lynch (DSPML) said in its presentation.

A new scenario is emerging in the power sector requiring a global approach and uniform regulation. Foreign players need to spend considerable time, cost and energy in understanding each State's policy regime that is affecting the interest level, DSPML said.

The Government has taken various initiatives to make the power sector investor friendly but lot more needs to be done, both the institutions said. The Power Ministry had sought leading financial institutions and banks' views to remove hurdles in the way of attracting FDI in the power sector.

ABN-AMRP Bank said for States which were reforming, the Central Government should work with the World Bank and the Asian Development Bank (ADB) to provide a partial risk guarantee for raising finance for generation, transmission and distribution.

Most financial institutions have also a unanimous view that transmission and distribution (T & D) should have been thrown open for private sector participation either before the generation or simultaneously with the generation sector. The country is losing about Rs. 20,000 crores annually on T & D and no foreign investor would be interested in putting money in the generation sector without a viable and efficient distribution sector.

India needs an investment of Rs. 800,000 crores in the next 12 years for adding one lakh MW of generation capacity along with investments in T & D. Nearly 50 per cent of this investment has to come from private and foreign investments.

DSP Merrill Lynch also said that each State electricity board should be considered a single entity and should be unbundled as 'one unit' to attract larger players.

- PTI

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