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Demanding Privilege

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Citizens do not show much respect for their elected representatives; when they erupt into riots in assemblies or Parliament, their electors think that is the best that can be expected of political opportunists. But our representative bodies have much hidden talent. Daggubati Purandeswari, for instance, is an accomplished Kuchipudi dancer. She is the daughter of Nandamuri Taraka Rama Rao, who fought the Congress and became the chief minister of Andhra Pradesh after a long acting career; but she has been a Congresswoman throughout her short political career.

If she had not been picked up for Bapatia constituency in 2004, she could well have made a living as a gem-cutter, for she has a degree in gemology. She fought against the deep prejudice in the central government against tobacco, and succeeded in ensuring crop insurance coverage to it. Her contribution to the debate on the bill for the establishment of courts exclusively to try cases of violence against women was significant. The Prime Minister expressed pride in her, and called her an asset. He made her minister of state in the ministry of human resources in 2006. In the reshuffle last October, he moved her to commerce and industry; but on being made aware of her lack of interest in the ministry, he shifted her within four days to the textile ministry.
After a month in her new post, she has made a proposal that the Andhra Pradesh government should exempt the information technology industry from power cuts. One can only lament Purandeswari’s relative youth, for if she had made this suggestion 30 years ago, before the rise of the IT industry, it would have made the industry’s investment in generator sets unnecessary; it would have reduced the industry’s costs enormously, and powerfully aided its rise in the global scene. It is possible that her perspective is limited to the industry of her home state; although it started early, it lost out to Karnataka and Tamil Nadu, which came to lead in information technology.

It perhaps rankles her that AP was overtaken despite human resources that are not inferior to those of its southern neighbours. It is a bit late in the day to try and revive it; now the IT industry is mature, and will grow at only a moderate rate, whatever favours are done to it. But if Andhra Pradesh assured the IT industry 24x7 power at moderate charges, it might well be able to attract some investment, especially from companies based in Karnataka or Tamil Nadu which seek to expand but find real estate costs daunting. 
It may be recalled that West Bengal, which simply does not figure on the IT map, has been dancing a tango with Infosys over its demand for special economic zone status. Although the imbroglio has not yet been resolved, the fact that the West Bengal government offered Infosys 50 acres in Rajarhat at Rs 75 crore kept Infosys from walking away. 
It is easy for politicians to ask for and give favours to their favourite industries; but Gujarat has demonstrated another approach to electric power that does not involve such narrow partiality. It has set up a separate distribution network to supply farms with cheap power at off-peak times at night; that allows it to give stable, reliable power to industries which work during the day. That does not apply to the IT industry, many of whose firms work day and night. But the demand for electricity fluctuates enormously by time of day and by season. That has led many utilities to introduce time-based pricing. Electricity drawn at peak is supplied from plants that work only part of the day, and hence bears high depreciation and interest costs, while electricity drawn off the peak is supplied from plants that run day and night and hence costs less. Users can make up their mind when they want to use power and at what cost.
However, whichever pricing system they adopt, state power utilities will bend to their political masters and subsidise farmers and domestic consumers; hence they will inevitably charge industries more. The only solution is to create enclaves free from the rule of state electricity boards, such as special economic zones. They would have their own power supply, and would not pay to subsidise politically favoured constituents. This has happened to some extent in India, but not to a sufficient extent.
The reason why it has not is that state governments are not prepared to let any territory escape their grasp. But as Gujarat has shown, rulers’ mindset is not fixed. It is perfectly possible for a state to set up a new type of zone where power costs are minimised with the use of technology, pricing and consumer mix. It is even possible for a state to be rational. Some state should try it; the rewards are immeasurable.

(This story was published in Businessworld Issue Dated 17-12-2012)