The government is considering taking steps to set up separate regulators for power and water sectors after unshackling their distribution from public sector monopoly.
Finance Minister P Chidambaram has stressed the need for the same for these sectors, days after asserting that independent regulators for road and coal sectors will come up by August-September this year.
“We need separate regulators for such sectors (power, water), whose role will be to keep the private producer working for the public interest while ensuring the producer makes reasonable profits and that the public sector does not transfer undue risk on to the private sector,” Chidambaram said.
The move may be part of small steps the finance minister recently promised the UPA will take, in order to carry forward economic reforms in the absence of Opposition support in the Parliament to push through big ticket reform measures. Also, such measures can tackle problems faced by the public utilities, including their tardy distribution.
The new National Water Policy too suggests that the government withdraw from its role as a service provider in the water sector. Instead, it says, communities and the private sector should be encouraged to play that role.
Power and water are two main public utility services remain under state monopoly in India. But, the finance minister is of the view that with advancement in technology, multiple producers can be involved in distribution of power from the same grid. But when it comes to water distribution, not much headway has been made for privatisation, Chidambaram recently said, acknowledging though much of India has moved towards privatisation of different sectors.
“Fortunately, there are fewer and fewer situations where pure natural monopolies exist. For instance, power distribution… nevertheless, there are still a number of areas, many of them involving services to the public such as water distribution, which are natural monopolies,” Chidambaram said.
A working group of Planning Commission recently recommended privatisation of water distribution saying it would ensure efficient water supply and help plug water and revenue leaks. A similar move by the Delhi government to privatise water distribution was opposed by experts but Karnataka recently became the first state in the country to privatise water distribution with several towns being managed by private companies under a 24X7 water supply scheme.
Promising separate regulators for road and coal sectors, Chidambaram had last month said, “There are often problems during implementation of road and coal projects. The government hopes to make the process easier with separate regulatory authorities that will be able to place effective mechanisms”.