thc_ctmss359_sept071 reforms in power & telecom sectors comparisons & contrasts & the...
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THC_CTMS S359_Sept07 1
Reforms in Power & Telecom Sectors Comparisons & Contrasts
&The Way Forward
BY
* Information Technology Adviser, Government of A.P* Director, Center for Telecom Management & Studies
* Chairman, Pragna Bharati (Intellect India), AP* Former Chairman & Managing Director
Videsh Sanchar Nigam Ltd., Bombay
T: +91 (40) 6667-1191, 2784-6137(O) 2784-3121®F: +91 (40) 6667-1111, 2789-6103 (O)
Hanuman.chowdarya@tcs.com thc@satyam.com
Talk @ Institution of Engineers, Hyderabad : 2nd Sept 2007
THC_CTMS S359_Sept07 2
Reforms in Power & Telecom Sectors Comparisons & Contrasts
•Conventional Wisdom-Natural Monopoly Undermined by technology and Consumption Volumes•Visions of Inventors & Liberalisers
“We will make electricity so cheap that only the wealthy can afford to burn candles”
- Thomas Alva Edison“Cities, countries and continents will be connected and people will talk to one another from anywhere, any time, to anyone…
- Alexander Graham Bell
Ghar Ghar mein radio; Gaon gaon mein telephone – Dr T.H.ChowdaryWe will make telephony cheaper than a post card – Dhirubhai AmbaniHaath Haath mein (cell) telephone; Goan Gaon mein Internet Kiosk
- Dr T.H.Chowdary2/16
THC_CTMS S359_Sept07 3
Purpose of Reforms
• Purpose of Reform: Increase supply, Invite investment
• Cost-oriented pricing
• Differential pricing (Rural/urban; industrial/commercial/domestic)
• Control of Cross-subsidies
• Quality improvement
• Customer Choice?
THC_CTMS S359_Sept07 4
Power:Characteristics & Issues
• Single consumer- SEBs• PPAs, “ sovereign” guarantees• Fuel costs & energy prices• Metering:• Time of day prices• Prepaid consumption• Citizen Charter - Quality of Power• Penalties, Compensation and Damages• Cost Discovery/ Admissibility• Board of Directors• Accountability• Consumer Involvement in Regulation• Captive Power- Bulk Consumers
8/16
THC_CTMS S359_Sept07 5
Energy ConsumptionKWH/person/year
Norway Japan USA Brazil
120,000 52,000 97,000 14,000
Russia China India
6,200 13,000 4000
World Av: 2,328
Source: Department of Energy USA (quoted in Bhavan’s Jounal, 31/8/07)
THC_CTMS S359_Sept07 6
Electricity Capacity & Generation
1980-81 1990-91 2004-05 2007
MW 33,400 74,700 1,37,500 1,50,000
•An increase of 2.1 times between 1991&2007.•In the same period telephones increased 44 times
THC_CTMS S359_Sept07 7
Gap Between Demand & SupplyPower:
2005-06 peak demand 90,119 Mega Watts
2005-06 peak demand met 80,631 Mega Watts
Shortage 10.5%
In A P peak touched 189. 3 mln units on 21/8/07
May go to200 mln
A P Transco wants o buy 400MW from private power traders
• In telephones supply capacity is more than demand (except for the PSUs – BSNL & MTNL)
THC_CTMS S359_Sept07 8
Significant Legislations: Electricity
• Electricity Act 2003 (intrduced competition & protect consumer
investment power for all)• Electricity Regulatory Commissions Act 1998• A P Electricity Reforms Act 1999 ( A P got: World bank Loan $ 210 mnl)• DFID £ 28 ($ 56 mln) • A P GENCO• A P TRANSCO (& Discoms)
THC_CTMS S359_Sept07 9
Rural Electrification
• Bharat NirmanRajiv Gandhi Grama Vidyuteekaran Yojana-
lunched April 2005
• Rural Electricity Corporation
• Experiment of Taluka/Mandal level Discoms in1990s (Anakapalli, Rajampet) Failure?
THC_CTMS S359_Sept07 10
Per capita consumption of electricity (kwh/person/year)in India
1950 1960 70 80 90 2001 2006
15.6 34.8 83.5 138.5 238 408 520
Tele-density1950 1994 20070.025 0.80 21Power Consumption:•Increase: 33.5 times•Tele-density increase: 840 times
THC_CTMS S359_Sept07 11
Villages Electrified/ telephoned
1947 50 70 90 2003 2007 2012
1500 3061 74,000 471,000 494,000 534,000 587,000
• Villages electrified : 82% [325 times]
• Villages telephoned (2007): 92.3% [6000 times]
THC_CTMS S359_Sept07 12
Corporatisation
• Rural Electricity Corporation• Power Trading Corporation• Power Grid Corporation• Power Finance Corporation all Central PSUs• State PSUs (Genco & Transmission companies)• Pvtes: BSES, Tata, AES, RPG, AEC, SEC …
plus Genco• Telecom Corporations:• BSNL (2000) & MTNL (1986)• 41 P-Telcos (1995 to date)
THC_CTMS S359_Sept07 13
Electricity Regulatory Commission
• CENTRAL:– Tariff of Gencos owned or controlled by
Union Government – Gencos (Pvte) which generate & sell power
in more than one state –Inter state xmission of energy
• State Electricity Regulatory Commission(s)
[Captive Power imposed cess/tax)!
THC_CTMS S359_Sept07 14
Regulation
Power Telecom
•CERC•SERCs
TRAI& TDSAT
• Telecom Regulation is continuously improving; promoting competition; company & consumer friendly.
• Power Regulation: No impact anywhere•TRAI & TDSAT’s mandate creatively extended to cover cable TV & DTH TV
THC_CTMS S359_Sept07 15
Power& Telephone Growth Rates
1996 2006 2007
PWR cap 95.1 MW 143 MW 150MW
Telephone 12 mln 150 mln 220 mln
Growth between 1996&2007Power: 1.6Telephones: 19.0
THC_CTMS S359_Sept07 16
Reforms in Power
Electricity Boards become Corporations
No change in ownership & control and personnel
Populist, welfarist, direction
loss, theft, collection - Seemingly out of control
Regulation: State & Central - not yet benefited
consumers Impact imperceptible
6/16
THC_CTMS S359_Sept07 17
Telecom Outcomes
• From “Apply, apply - No Reply”
To bounteous supply• We now have 240mln phones, 85% mobiles
– far in excess of 11th plan target• Teledensity increased from 0.9 in 1994 to
21% now (2007)• Telephones work during rains and floods
and storms – New Technologies OF cables and Wireless
THC_CTMS S359_Sept07 18
Telecom Outcomes contd..
• Cell-phones are now mass consumption appliances.• Their prices came down to one-tenth to one-fifteenth in
eh last 10 years• 85% cell subscriptions are prepaid
- no billing; revenue before costs/ service!- Users control expense
• Affordability increased 15 fold sine 1951; 6 fold in the last decade
• Electricians, drivers, plumbers, carpenters, masons, welders, street-vendors; mazdoors have phones!
• 600k/650k villages have telephones
THC_CTMS S359_Sept07 19
Telecom Outcomes
Demonopolisation brought • New technologies• Capital costs came down (by 90% from
Rs.40,000/line to less than Rs.4,000/-)• Prices came down ( by 97% for ISD calls 90% for others)• Myriad new services ( on the cell-phone-digital
cameras, Internet Access)• 90% reduction for global tele-links; enabling
India’s software companies to be competitive spread to Tier II cities [like Visakhapatnam, Mangalore, Coimbatore.....]
THC_CTMS S359_Sept07 20
Telecom Outcomes
Demonopolisation brought contd..• BPO, KPO & software companies enabled
to be born & remain competitive due to drop in band-width price & bandwidth even in II tier cities
• E-governance, e-procurement, e-education, anytime, anywhere banking;
• e-public relations• India becoming R&D & design center for
the world eg. Satyam’s digital car
THC_CTMS S359_Sept07 21
Affordability of Telephone
1951 1994 2007
Revenue/Line Rs. 625 Rs.10,000/c Rs. 5000
Rev. PCI+ 2.5 1.0 0.12
Affordability PCI = 20 times rise
Tel. Svce.Price
THC_CTMS S359_Sept07 22
Affordability of Electronic Devices:Ratio of Price of Device to Per Capita Income
1951 1974 1994 2007
Radio 2.0 0.5 0.02 0.005
TV Set NA 1.9 1.2 0.37
Year’s Telephone Service
2.5 1.0 1.0 0.12
PC NA NA 6.0 0.75
THC_CTMS S359_Sept07 23
Telecom Outcomes Demonopolisation brought contd..
• We are the lragest(7.5 mln cell phones / month) market in the world-larger than China (5 mln/m)
• Rs. 90,000 cr of private investment came into the sector
• P-Telcos are investing about Rs. 40,000/yr
• Telecom revenues are Rs. 1,10,000 cr/yr
THC_CTMS S359_Sept07 24
Size of Power& Telephone companies
• India is the 6th largest producer & consumer of electricity• India’s is the 3rd largest (after China, USA) telephone
system and 2nd largest market in the world ( after China)• Power consumers: 90 mln• Telephone subscribers: 220 mln• Telephones are consistently exceeding the targets for
growth• Electric power generation capacity target for 1992-97 : 40,000 MW Achievement: 17,000• Telephone provisions exceeding targets & imagination.
THC_CTMS S359_Sept07 25
Comparison/ contrasts
Telecom Power
Productivity Increased 5 fold in BSNL
P-Telcos: Better than EU and US because of a new business model
( no. of phones/ employee)
Only a little increase
Profitability 45% of revenues
are surpluses
Losses
Cross-subsidies Only BSNL’s rural phones are subsidised
Agriculture &”poor” are subsidised
THC_CTMS S359_Sept07 26
Comparison/ contrasts
Telecom Power
Customer Choice- Enhanced - NonePrices - Going down - Going UpQuality - Improving - No DifferenceInvestment - Copious - A little
( domestic/foreign)Growth - Tremendous - A little
11/16
THC_CTMS S359_Sept07 27
Down side of Telecom Liberalisation
• Indian equipment manufacture almost dead• Indian R&D – reduced to “nominal”; hardly any
user• Indian contribution to network construction• Low-end; labour intensive (towers, batteries,
A/C; shelters, trenching & cable –laying…)• All network equipment imported/India
Assembled• Indian R&D personnel creating IPR for foreign
owners ( i/c Chinese!)
THC_CTMS S359_Sept07 28
Reforms in Power & Telecom Sectors
•What must be done in Regulation:Revamp body to make it consumer-caringBuild expertise/ capacityFill with talentsAvoid civil servants, ex-monopolistsMake Appointments TransparentConstitute Regional & National Consumer CouncilsPublish Consultation PapersAssist Research by Consumer bodies & ProfessionalsTRAI to have offices in State capitalsFund consumer bodies to build them into counter wailing power against companies
16/16
THC_CTMS S359_Sept07 29
What we should aim at
• Power to be in Union jurisdiction upto District Level [generation and transmission]
• Corporatise & Privatise Power Companies - State to Disinvest
• Privatise BSNL & MTNL and break up BSNL into State-wide Companies
THC_CTMS S359_Sept07 30
Dhanyawad:Thank You
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