Dodgy Development V: Power to the people?

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The fifth part of Dodgy Development: DFID in India looks at the effects of the UK Department for International Development funding on power sector reform in India. The DFID has stated that one of its priorities in India is, “strengthening the capacity of government to develop and implement pro-poor policies”, as “governments have [often] expanded their role so far that they have become ineffective in providing basic services, and have made a disproportionate claim on public resources… The starting point for change has often been the need to reduce subsidies in the power sector”. As a consequence the DFID has given more than £200 million to the Governments of Orissa, Andhra Pradesh and Madhya Pradesh to “restructure their power industries and seek greater efficiency”.

The following film, shot in affected areas of Madhya Pradesh and Orissa, and interviews with the Secretary of the Madhya Pradesh power sector employees’ union and a Member of the Madhya Pradesh State Parliament demonstrate how British aid has funded reforms which have pushed prices up by more than 200% and increased disconnections and power cuts. Moreover, these reforms have been implemented beyond the scrutiny of parliament and elected representatives and have ignored employees whilst giving the major part of British aid to management consultants.

Vinay Pandey is the Convenor of the Madhya Pradesh State Electricity Employees & Engineers Coordination Committee, an umbrella body of 17 unions and workers bodies. Here he explains the practical consequences of the reforms to the power supply in Madhya Pradesh and describes how the suggestions and ideas of the employees have been excluded in favour of those of management consultants brought in by the DFID.

Richard Whittell: In its project memorandum regarding support for the Madhya Pradesh Power Sector Reforms, the DFID says the goal of its funding is to “support the development of an efficient, accountable and financially viable power sector in Madhya Pradesh”.* Has this goal been achieved?

Vinay Pandey: At the state level as well as at the national level, through the All India Power Federation, we feel that the whole reform process has been misguided. We feel that after a decade of reforms the situation has deteriorated.

The reform process was guided by the Asian Development Bank, which provided a loan, and the consultants brought in through the DFID and the Canadian International Development Agency (CIDA). These consultants failed to take into account the real ground situation and it has moved to a situation where electricity is being sold as a commodity instead of a social service.

It is being charged on the basis of cost of supply when it should be on the basis of capacity to pay. A precondition of the loan was that the cross-subsidy element had to be eliminated. In a country like India, social and economic disparity is high and the poor farmer cannot be expected to pay on the basis of cost of supply. So it has created more problems for the common people.

Why is charging on the basis of cost of supply more expensive for farmers?

When a commodity is charged on the basis of cost of supply, the electricity is supplied in bulk to the big consumers such as the industrial sector. For any product the cost of bulk supply is much less than the cost of retail supply. In Madhya Pradesh, the geographical spread is high and farmers are scattered throughout the state. Low tension lines feed the farmer. On the low tension lines the technical losses are high. So it follows the law of physics. The law of physics says that as the low tension line length increases the technical losses will be higher. This resultantly implies that the farmers and the domestic consumers will have to be charged higher.**

This was a precondition of the reforms that were brought in, that were supported and advocated by the consultants engaged by agencies such as the DFID. And they created the problem. It is creating a rift within the society. We have repeatedly pleaded that in a country like India where the growth of the common person is very important, and the survival of the agriculture sector is the question of the survival of the farmer, electricity has to be treated as an essential service. It is the duty of the state. We cannot leave it to the profit earning organisations; we cannot apply commercial principles to this. We have to decide at some point in time whether it is a social obligation on the state or it is a commercial entity. And we just cannot support the idea that it can be run as a commercial entity like in developed countries because there you have life support systems; there are systems already in place that support a poor person in case of need regarding health, education and the basic livelihood concepts. And if we charge electricity on these rates, this will create a catastrophe.

The DFID argued that the reforms would cut revenue losses and theft, which would lead to better services for everybody.

We just don’t subscribe to that theory. The basic problem is that we are suffering from lack of generating capacities. For years, because of these reform programmes and because the conditions attached to them said that no additional generating capacity would be brought into the system, now we have reached a point that prior to reforms, there were two hours of power cuts but after a decade of reforms we are now facing six hours of power cuts. It is a question of investment and investment in the right direction.

And that has created a distortion. We repeatedly pleaded and we launched a campaign. We succeeded in bringing out the facts but even with all our efforts the augmentation of the generating capacity was hampered by this negativity and that is causing the real problem. Earlier we were generating more power, power equal to our demand but now we are ranked as power deficient.

When we are power deficient a state has to make an expenditure ten times the generating cost. So on the financial front it has created a very huge loss position. The consultants say that because you are in loss you shouldn’t go for investment in the generation capacity. But the real thing is that until and unless you make investment in the generating sector, this loss position can never be addressed. We have gone down the wrong path and therefore as the reforms progressed the power situation in the state has deteriorated and the financial position has also deteriorated. Both things have happened simultaneously. Again the consultants could not assess the situation in the Indian context.

So the employees are getting less pay, people are forced to pay higher tariffs and power cuts have gone up. So what sort of reform has taken place? And for whom has it taken place?

One of the first reforms was the ‘unbundling’ of the electricity supply – splitting the electricity board into separate transmission, generation and distribution companies – which the DFID argued would make it more efficient and more responsive to consumer demands, and help to “prepare the new sector entities for a more competitive and business-like environment”. Has that happened?

Why is it needed to unbundle an electricity board? Hewlett Packard is integrating its business with Compac because they say economies of scale will help. It will help with reducing cost. It will help with providing better services to the consumer. So why instead of integration we are going towards disintegration? The entity which was looking after the generation, transmission and distribution has been forced to ‘unbundle’ in the name of reform, in the name of aid, in the name of grants, in the name of loans, the preconditions of which were specified by these agencies: the Asian Development Bank, the DFID or the Canadian Development Agency. Everybody knows that in today’s world competitiveness goes down if you are a smaller sized entity and it is more difficult to survive.

So whether this is being done to provide better services to the consumer or whether it is being done to enable privatisation – so the private bidders can easily take over these companies – is a big question and it has to be answered.

DFID-funded power sector reforms in Orissa led to part of the service being privatised and the DFID’s Project Memorandum for Madhya Pradesh talks of the reforms leading to “a commercially viable power sector, which will be an attractive investment opportunity to the private sector”. Why hasn’t the service in Madhya Pradesh been privatised?

There has been a large opposition from the union and from the people and we are determined that we will do whatever is possible to oppose the privatisation.

Whenever this privatisation comes up it always caters to the ‘creamy layer’. Everyone is interested in entering into the business which is a profit generating business. Everyone is interested in entering to the urban areas, everyone is interested in supplying to the industrial consumers. But who is going to supply power to the poor farmer? Who is ready to supply power to the rural population? And can an organisation, can a country, can a state survive where you have got division between the haves and have-nots in such a situation that the have-nots will not have any electricity? In today’s world, it will not be democratic.

Privatisation of the electricity industry or, for that matter, of any infrastructure for basic essential services becomes a question of privatising the profits and nationalising the losses. That’s not acceptable. We in the National Coordination Committee of the All India Power Federation, the Western India Power Federation, and the Madhya Pradesh Employees Union are opposed to that philosophy.

Even without privatisation there have been demonstrations against the reforms.

One thing is clear: in general if you look to the media reports, if you go and ask any person on the street, people are not as happy as they were in the 1990s. In the 1990s there were no power cuts. The electricity bill was not causing shock to any person but now the electricity bill generates shock. There are power cuts. People are not satisfied with the overall situation and there can be no denial of the fact. So the test is on the common street. It may be true that people may not be aware of the role of one agency, the DFID or the Asian Development Bank, or this and that, but overall it has generated more dissatisfaction than satisfaction.None of the agencies, I don’t think, have been able to earn appreciation for their role. Until and unless they change their basic paradigm, they will not.

In state after state this has happened and the problems of the infrastructure, particularly electricity, have caused turbulence. It is an issue which affects every common person and therefore it affects the political fabric of our political system. It is a big political issue, it is a big economic issue, it cannot be denied and therefore we plead that managing the sector should be the responsibility of those who know the sector. We cannot go to the consultants who don’t know the sector. A blind person cannot guide me. But we are sorry to say that the prescriptions of these agencies like the DFID were just like that.

Much of the British aid money went to consultancy companies, including Ernst and Young, PricewaterhouseCoopers and KPMG, for “technical assistance”. What kind of expertise did these consultants provide?

The biggest contribution was in their ability to generate presentations. Nice presentations, nice decorative plastics, PowerPoints and a huge compilation of reports. Report after report after report. The whole grant has been for the consultants, by the consultants and of the consultants.

There is a basic question which has come up before the reform process, whether it was intended in the right direction; whether those who were suggesting, who were guiding, who were giving the consultancy, whether they had any real assessment of the ground situation. We feel very [keenly] that most of the consultants who came into the process, who jumped on the bandwagon, didn’t have any real assessment of the ground situation.

The employees who devoted their lives, who served in the sector, who knew the ground realities very well; they were never taken into account, they were never taken into confidence. Their views were never taken into consideration.

So you were not consulted by the DFID?

No. No-one directly interacted and, as far as I know, none of the unions were taken into confidence. Some of the consultants interacted but [interacting] and listening are two different things.

The employee’s perspective is very interesting. Everywhere it is said that if you are running an organisation until and unless you take the employees into confidence, until and unless you address the human resources, you cannot succeed in anything. And we are unable to understand why in this whole process, at no point in time, it has been attempted to take the employees into confidence.

In 2004, we carried out a survey – it was the biggest survey conducted of electricity employees and engineers in India – and about 1,000 employees participated from headquarters. Even at the headquarters, less than 2% of people said they knew the objectives of the reforms. 98% were not sure what the purpose was of the reforms that were taking place. Almost three quarters of employees were of the opinion that these reforms are not guided by the Government, or by the needs of the common people but by the agencies from the UK and the Asian Development Bank. So if that is the feeling it raises alarm bells.

What were the effects of the consultants’ recommendations?

At the end of the day, when we sit down and assess the situation we are unable to see that anything positive has come out of the whole thing. Rather, we are seeing in the neighbouring state of Chhattisgarh where there was no such programme, where they were supposed to work on their own, they have been able to perform better, their systems have been strengthened. Because they have done it on their own.

In almost all the fields, whether it was human resources, or whether it was information systems, what we have seen is that where the consultants were not there, they were able to implement good systems. So, the proof of the pudding is in the eating and if the end consumer is not satisfied, if the employees are not satisfied, if the electricity utility which is being assisted is not able to generate profits, then where is the pudding?

It has created more hindrance or, you can say, more delayed procedures than anything else. Out of this whole consultancy assignment, or reform assignment, the beneficiaries were the consultants. No-one else. It puts a big question mark on the process, on the implications and on the basic objectives of the process. It raises a question mark to the intention of these agencies. We have reason to doubt their intentions and their objectives. And unfortunately no-one has ever come to answer these questions.

What has been the effect on employees?

There is a lot of resentment. As part of the reform process, one of the consultants came in and made the recommendation that the number of employees was too high and should be cut by half.

They submitted that report but it was challenged by the unions. The logical data was presented, which shows that it is not possible under the geographical conditions of the state of Madhya Pradesh to cut the number of employees and sustain provision. You cannot say that if one driver is needed for a bus then only one tenth of a person will be needed for driving a car. You need one driver for a car also and even if you have a bicycle you need one person.

They took an algebraic equation from a metro city like Bangalore, where there are big apartment blocks and so on, and they said that for this amount of population there is one employee. You cannot apply that algebra to the rural population, where the demographic pattern is too scattered. The population density is one tenth of Bangalore. In some pockets it is one hundredth of Bangalore so that equation cannot be applied – it is too simplistic to make such an assessment.

But once the report got to the government, even with all this opposition, it definitely hampered the process of recruitment and in ten years of consultancy no fresh recruitment took place. Ultimately it has resulted in a situation where we need 70,000 employees to serve the state but we are forced to serve with 52,000 employees, and they have an average age of 50. So the quality of service definitely deteriorates.

Ultimately, even with all the technology, all the software and computers, […] the electricity supply needs personal care. To rectify a wrong connection you need someone. The computer cannot do that job. And therefore this aspect is hurting the consumer as well as the employees.
* All quotes in the interview are from the DFID Project Memorandum, Support for the Reform of the Power Sector in Madhya Pradesh

** “The present tariff for domestic and agricultural (low tension) consumers is more than 3 times that of 2001 (i.e. increase of more than 200%), while that for industrial consumers is only about 1.2% times (increase of 20%)” – A decade lost; what’s next? Looking back at power sector restructuring in Madhya Pradesh, Nikit Abhyankar, Economic and Political Weekly, Vol XL, No 48, November 26, 2005)
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Dr Sunilam is a Member of the Legislative Assembly of Madhya Pradesh with the Janata Dal Party. In this interview, conducted in Delhi, he describes how development programmes funded by British aid have been kept from scrutiny by elected representatives in the state parliament or local assemblies.

Richard Whittell: Does a state like Madhya Pradesh, which has high levels of poverty, need the help of the British Government’s Department for International Development (DFID)?

Dr Sunilam: For development projects, definitely investment is required but the point is when you are working in a democratic system you need to discuss each and every thing, and these issues have not been discussed in the state assembly. I have been a member of the legislature for the last nine and a half years and there has been no discussion. I have asked many questions about the impact and the conditions attached and I could not get a single reply from the government.

For example?

Recently the agencies have given Rs900 crore (£130 million) for the water reforms and I asked what the conditions attached to it were, whether public taps would be removed, whether the cost of water would be increased, and what would happen to the employees who are working for the water now and so on, but they never replied. They even said there was a draft proposal about the water reforms which had been prepared by the DFID and not by the people’s elected representatives. And when I asked for the draft they would not give it to me.

Who did you ask?

The government.

The DFID flags up accountability and the strengthening of democracy as important parts of its work. According to their country plan for India for example, “across India, decentralisation of responsibilities to the elected government is seen increasingly as a key strategy for improving effectiveness of basic services”.

The panchayats (local assemblies) were not taken into confidence. The representatives of the panchayats at the village level and the district level were not taken into confidence although they have constitutional rights. They talk about decentralisation so they should have taken the panchayats into confidence. It was also never discussed in the state assembly. I have been a member there for nine and a half years – this is my second term – and the DFID’s grants have never been discussed. Any grant you take, its impacts should be discussed.

None of the DFID’s reforms were discussed?

No. Even when I asked many questions about the conditions and what the impact would be they never replied. They just rejected the questions. They have to honour the democratic process and they are not ready to honour it. They are not taking people into confidence. They have their own agenda which they want to implement. That is not acceptable to us.

The DFID’s India plan says, “the DFID can have most impact through genuine partnerships with central and state governments. DFID’s approach is therefore to enter into long-term partnerships with states which are themselves committed to eliminating poverty and are following the kind of policies needed to achieve that goal”. One of its stated priorities is, “strengthening the accountability of government to those it represents”.

If they are not even accountable to the representatives then how can they be accountable to the people?

They have to talk to the representatives. If you are working at the district level or the village level these representatives must be taken into confidence. At least they should have the right to know what is happening and what the impact will be of the whole thing. But nobody knows about it. Nobody knows the figures, how much is coming. Studies that were conducted were not discussed and that is the issue.

Firstly, they have to be accountable to the panchayat representatives and the assembly representatives and the parliament. We have the Panchayati Raj system, so at the village, block and district level everything should be discussed. If nothing is discussed the whole thing is very undemocratic.

But they say a scheme like the Madhya Pradesh Rural Livelihoods Project actually strengthens the Panchayati Raj system through its strengthening of democratic decision making at the local level.

That may be their point of view but if they say they are strengthening the system they should come out with all the facts. And these facts should be discussed democratically in the assembly and district panchayat meetings.

Their reason for working with government is given as, “the best way to provide lasting support for poverty elimination is to help governments formulate good policies and strengthen the effectiveness of their service delivery systems”, and “to strengthen and develop a joint understanding of the development challenges and priorities [DFID faces] in achieving the Millennium Development Goals”.

About these Millennium Development Goals: in Madhya Pradesh, more than 11.5 lakh (1.15 million) people’s names were removed from the list of those people who are below the poverty line and this was done when the DFID was helping them to reduce poverty. When I asked the minister responsible he informally told me that ‘the development agencies, those that are funding us like the World Bank and the DFID, they ask us why our figures were going up. So to reduce the number on papers we cut down the names.’ And this is 11.5 lakh people, more than 1 million people! Their names were removed in Madhya Pradesh.

So I would like to know what exactly they have done on these issues. On every single issue we can talk for hours because we work in the field and know that the situation is worsening, particularly the drinking water situation in Madhya Pradesh. At least at this time if you go around Madhya Pradesh throughout the night you will see people, particularly women, collecting water, throughout the night. It’s a big, big problem in Madhya Pradesh. So what [are] the DFID or the Government of Madhya Pradesh doing for the fulfilment of these Millennium Development Goals?

It’s a question of the flow of capital. Still the flow continues from South to North – you have many figures to prove that – and whatever resources we have they want to capture them. The ultimate aim is privatisation and to capture the natural resources of India. That is the intention, and for that they are lobbying, through the World Bank, through the Asian Development Bank, the International Monetary Fund or through the DFID. It is all the same and that’s why we oppose it.

The DFID funding has been consistent through two different governments – of both the Congress and the BJP parties – in Madhya Pradesh and at the national level it has continued from 1997 through two different governments in the centre. In whose interests is it acting?

They are working in the interests of the companies. They want to privatise the power sector, the health sector and education. The whole idea is to give profits to the companies, particularly the multinational companies.

But we are now seeing a people’s uprising against the liberalisation, privatisation and globalisation process, and such development projects as those of the DFID, which are trying to divide the people and divide the non-governmental organisations that are working with the people. This is not good for the people and is not good for the whole NGO sector because it is being discredited. They are playing into the hands of a few development agencies. Politicians in this country are already discredited, and if this NGO sector or the grassroots movements are also discredited it becomes a big threat to democracy and it will injure it.

Can you give us an example of that?

It is no secret which NGOs are taking money from the DFID. All those NGOs should be accountable to the people but they are not really serving the people at large. They are working against their interests and are working for the companies in the longer run. Because finally in the water sector or power sector, when they say reforms it means that it is being privatised and the profit is going to companies and people will be squeezed.

The DFID is a ministry of the British Government and, in principle, is accountable to British people. What role should the British Parliament be playing in the DFID’s actions?

They talk about democracy and they say they have full faith in the democratic norms, so all these things should be discussed at all levels. These things should be placed before the people, particularly if they are saying they are saving lives. The British Parliament should ensure that all the facts and figures are brought before the people before any project is implemented.

The people of the UK have the right to know what is happening with these projects when they say they are working for the well-being of the people. You know, when it was the British Raj, they also said, ‘We have come to enlighten the people of India, we are here for the wellbeing of the people’. Those who rule or those who want to rule through various development projects or schemes always talk about their good intentions but what is the hidden agenda? That must come in front of the people.
For more information on water and energy reforms in India, please see: www.manthan-india.org/

For a DFID account of the success of the reforms, please see: www.dfid.gov.uk/media-room/case-studies/2009/india-power-reform/ See also:

Dodgy Development: Films and interviews challenging British aid in India

Dodgy Development VI: False promises June 25th, 2010

Dodgy Development IV: ‘A DFID colony’ May 05, 2010

Dodgy Development III: A DFID Education April 09, 2010

Dodgy Development II: Smile for the camera February 25, 2010

Dodgy development: DfID in India January 28, 2010