On 31 July 2012, India faced its biggest power failure to date, with half the country losing electricity. In the days that followed, there was an intense debate about the state of power reforms in India, with predictable calls for increasing reforms. This debate reminded us that 12 years after the biggest strike by power sector workers in India over precisely these kinds of reforms, the condition of the power sector had not improved.
On achieving independence from British colonial rule, the Indian government decided that core sectors of the economy, including infrastructure, would function under state control to fulfill the state responsibility of supplying essential goods and services to citizens at reasonable prices, while ensuring that the goals of industrialization, economic growth and socio-economic equity were met.
At the time of independence, approximately 80 percent of India’s power supply was provided by private companies or local authorities and was thus limited to urban areas. After independence, these companies and authorities were taken over by State Electricity Boards (SEBs). In Uttar Pradesh (UP), the biggest and most populous northern Indian state, the UP State Electricity Board (UPSEB) was formed in 1959. This became second-largest public utility in the country, employing more than 125,000 people.
Despite fast growth, by the 1980s many SEBs, including the UPSEB, were in deep financial crisis and on the verge of bankruptcy, with mounting losses, unsustainable debt, and increasing power shortages. There were many reasons for the development of such a crisis. Partly it was due to poor and inefficient governance, management and regulatory practices; poor metering and billing; lack of accountability for leakages in the system; and the need for ensuring rural electrification on low-power transmission lines from which thefts were easy. The state governments also catered to their political constituencies by subsidizing power tariffs, particularly for wealthy farmers, which ended up creating even more inequity. Lastly, the central generating companies’ tariffs had increased by much more than the rate of inflation.
Instead of addressing these basic issues and improving management and governance, the governments bought into the World Bank and Asian Development Bank models of reform. These models, with their emphasis on reductions in subsidies, manpower and non-viable operations, and progress towards privatization, did not address the complex socio-economic needs of developing countries and shifted from the existing socio-economic orientation of the power sector to a purely economic orientation. Power thus became a commodity governed by the market.
In 1989, the World Bank announced that requests from the electricity sector of developing countries added up to $100 billion per year and only $20 billion was available from multilateral sources. It also announced that further aid would be conditional on a country’s willingness to reform its power system.
Along with the financial crisis facing the Government of India, this announcement by the World Bank compelled the Indian government to consider implementing radical reforms in the Indian power sector. The National Development Council (NDC), under the guidance of the World Bank and the Asian Development Bank, submitted a policy report on power sector reforms in 1994. It recommended breaking up (“unbundling”) the SEBs’ responsibilities of generation, transmission and distribution; privatization of generation and distribution utilities in the states; private holding of equity in the central sector utilities; international competitive bidding; creation of independent regulatory boards at the central and regional levels for regulation of tariffs; and phasing out of subsidies to agriculture consumers. This process culminated in the Electricity Regulatory Commissions Act 1998, which complied with the World Bank’s diktat of ensuring that tariffs would not be ‘politicized’ and profits would be maximized for private companies, while reducing the government’s flexibility to cater to the needs of different segments such as poor and marginal farmers and slum-dwellers.
The World Bank also skewed the rules of the game in favor of maximization of profits by private companies at the cost of SEBs and consumers. The Electricity Act 2003 was largely based on the reform strategy advocated by the World Bank. According to the provisions of the Act, distribution licensees would be free to undertake generation, and generating companies would be free to take up the distribution business. As a result, the path was cleared for big corporations such as Reliance and Tata to expand their presence in the energy sector at the cost of SEBs, which were denied a level playing field as they were being forced to ‘unbundle’ while private power companies were being allowed to integrate generation and distribution. All in the name of competition!
Restructuring of SEBs in Uttar Pradesh
In UP, in the early 1990s, the World Bank funded a study commissioned by the state government and conducted by consultants from the UK to analyze UPSEB’s situation and suggest improvements. The study, submitted in 1995, concluded that: (a) There was high political interference in UPSEB’s functioning, (b) its financial losses were mainly due to the existence of high subsidies, low tariffs, high transmission and distribution losses and poor bill collection, and (c) causes of UPSEB’s poor efficiency included poor financial policies, poor revenue collection and losses, over-staffing, poor service quality and political interference. Not surprisingly, the study echoed the recommendations of the 1994 NDC study that the UPSEB be split into three separate entities: Thermal Generation, Hydro Generation, and Transmission and Distribution.
UP passed its Electricity Reforms Bill in 1999, and on January 14, 2000, the Board was dissolved and divided into three independent corporations – UP Power Corporation (UPPCL), UP Rajya Vidyut Utpadan Nigam (UPRVUNL) and UP Jal Vidyut Nigam (UPJVNL) – responsible for transmission and distribution, thermal generation, and hydro generation, respectively. The World Bank sanctioned a loan of $150 million for the UP power sector restructuring project.
Concerns of Employees and the Strikes of 1999 & 2000
The employees of UPSEB were not consulted before the drastic decision to privatize and restructure was taken. The employees had some concerns that the board simply refused to acknowledge or address.
Firstly, there was no clarity on the status of their General Provident Fund (GPF) and Pension Fund. The UPSEB used the 30 billion rupees collected in these employee funds to invest in fixed assets. However, employees were worried that after privatization, no private company would put money back into their retirement fund. Since over half of the 87,000 workers were due to retire within five years, there was apprehension among the workers about ever getting back their GPF and Pension Fund money. Moreover, the workers felt cheated that the state government made plans of privatizing without even consulting them.
Secondly, workers were concerned about the continuation of existing work conditions and established practices and a reduction of their bargaining power if they were divided into three organizations. Unbundling into three separate companies would also reduce their flexibility in transferring between rural and urban locales and between different internal divisions. Many employees would work in remote areas for about five years in the rural thermal and hydro-electricity generation plants, and then shift to the cities, in the sub-stations, transmission or distribution division, thereby allowing their children to get a better education.
Lastly, workers were not encouraged by the experience with the similar restructuring and privatization of the Orissa State Electricity Board (OSEB), as the financial condition of the Transmission Corporation in Orissa worsened after restructuring.
In March 1999, many UPSEB employees struck work immediately after the Electricity Reforms Bill was passed. However, the state government invoked the Essential Services Maintenance Act and the National Security Act, called in the army and succeeded in crushing that strike within a couple of days. The workers appealed to the High Court, which passed an order assuring employees that their interests and rights would be honored. However, the state government did not initiate any discussion with employees, or make plans to replenish the GPF and Pension Fund or to formulate their post-reform service conditions.
In December 1999, the UP Powermen Joint Action Committee (UPPJAC), consisting of engineers, staff and operators, decided to go on strike if the board was restructured. Nonetheless, the state government announced restructuring of the UPSEB into three separate organizations. On January 14, 2000, all UPSEB employees (operators, engineers and staff) went on strike to protest against the trifurcation. The state government again responded with repressive actions but did not succeed.
The striking employees demanded that the government reverse the decision to trifurcate, secure their Pension Fund and GPF, initiate a discussion on service conditions, and defer the decision on privatization. As four of the state’s six power plants shut down and power shortages spread, the Uttar Pradesh government declared the strike illegal and requested that the national government deploy troops outside power installations. Six union leaders were detained and 1,700 employees put under house arrest. Houses of striking employees were raided and people were picked up for questioning by the state police.
Even as negotiations between the government and UPSEB employees continued, the government terminated services of 208 striking engineers and declared that there would be no going back on the trifurcating of the Board. Meanwhile, on 21 January 2000, the Uttar Pradesh High Court restrained the state government from ’disturbing the privacy of striking employees by visiting their houses at odd hours’. That halted the police raids but the national power minister declared that the strike was being sustained by the mafia and threatened to refer UPSEB to the Board for Industrial and Financial Restructuring (BIFR) if the strike continued. The state government gave the employees an ultimatum to resume duty by 24 January or be dismissed from service. When the workers did not budge, the government resorted to repressive measures. The Army was called in to maintain the electricity supply, but 20% of the supply could not be maintained. In desperation, the UP government terminated 25,000 workers and started fresh recruitment. It advertised for clerks, technicians and labourers, and dismissed 495 engineers and arrested 6,279 power operators.
On 24 January 2000, a one-day token strike was organized by electricity workers and engineers across India to express solidarity with the agitating employees. The four major national trade unions came together to express solidarity with the UPSEB’s striking employees.
Even though UPPJAC demanded the release of some of their key leaders so that talks could be held in a democratic way, the UP government continued to act highhandedly and resorted to large-scale dismissals and mass arrests. The 11-day power strike ended on 25 January 2000, with the employees accepting the trifurcation of the board and the state government agreeing to defer further privatization, discuss the service conditions and review trifurcation a year after its implementation. The state government also agreed to pay 10 billion rupees towards the employees’ GPF before 30 April 2000 and to pay the remaining part subsequently.
Officials conceded that if major parts of the state had actually been plunged into darkness, it would have been next to impossible for any state government to carry out power sector reforms. However, even a historic strike by nearly 100,000 workers was unable to stem the tide of ‘reforms’ and privatization that continues unabated till today.
Anjula Gurtoo and Rahul Pandey, in an article published the year after the UP strike, noted that “power reforms in Indian states are being pursued as a matter of escaping from the burden of poor financial condition of SEBs and the state governments... Even though large-scale inequity in economic status of different sections of population remains, ’equity of distribution’ has been officially thrown off-board as one of the important policy concerns... The manner in which the reforms model has been implemented so far in UP, points to an extremely serious concern of breakdown of institutions of democratic governance and possibility of similar and more autocratic subversions in future.” Another commentator wrote that “there is a threat that privatization of essential service utilities, in a society with economic disparity, will institutionalize inequity.”
The struggle against privatization of power sector companies and the struggle of power sector workers, especially against casualization of work, is far from over. For example, in the city of Nagpur, an independent union of electricity workers organized 5,000 out of the 10,000 contract workers employed by the Maharashtra State Electricity Board (MSEB) and succeeded in winning major gains, including the improvement of working conditions and the implementation of minimum wage, bonuses and other statutory benefits. The union has also won security of employment for the contract workers, who can now remain on the job until they reach the retirement age of 60, even though the contractors may keep changing.
Electricity workers and unions continue to demand the repeal of the Electricity Act 2003, claiming it to be the cause of severe imbalances in the power sector. A recent analysis by Sagnik Dutta of the blackout that occurred in twenty-one Indian states in July 2012 is very much on the mark, stating that the crisis is the result of “mounting losses of the State Electricity Boards and power distribution companies, which have been compelled to buy power at higher rates as a result of large-scale privatization of power generation.” Highlighting the dire stress faced by SEBs, the article correctly concludes that “the crisis is a part of the larger story of the gradual abandoning of planning to leave essential services to the brutal control of market forces.”
It has been and continues to be a tough battle to resist privatization and the corporate grab of public assets in the name of competition and improved governance.