Dear David,

I'm so glad you asked for an update!

We have indeed had an interesting development regarding the Electricity Bill 
since your visit.  You will recall that in AMCHAM's briefing, it was 
positively noted that the drafting process of the Electricity Bill had been 
transparent and that a draft that would provide a blueprint for the 
restructuring of the electricity sector to move toward competitive markets 
was attained.  Noone was 100 percent satisfied (probably the mark of a good, 
passable bill) but many  agreed to the draft and felt, while not perfect, it 
would achieve the desired reform.

We have learned that there are actually two drafts of the Electricity Bill 
sponsored by the Ministry of Power.  The first has been developed by NCAER 
(NCAER draft) in a very transparent process with seven iterations and 
comments from 190 parties.  NCAER was hired as a consultant for this purpose 
by the Ministry of Power.  At the time of Draft III, a second draft (MoP 
draft) was developed in the Ministry which subsequently incorporated some but 
not all of the NCAER draft provisions negotiated in the transparent process.  
It was the MoP draft that was sent to the Group of Ministers and has been 
worked on by the Ministry of Law.

The draft, however, was never introduced in Parliament.  The industry 
discovered the existence of the second MoP draft immediately prior to 
Minister Kumaramangalam's hospitalization and lobbied him and Secretary Basu 
heavily to introduce the NCAER draft in Parliament or, at a minimum, allow a 
transparent commenting process on the MoP draft.  

Several parties in the industry have now been given the MoP draft, and 
Secretary Basu has said he would entertain comments.  (How widely it has been 
distributed is unknown.)  In addition, the death of the Minister, who was a 
staunch advocate of reform, and the lack of a named successor, has now left 
things somewhat uncertain.

The issues as they now stand are:

The existence of two separate Ministry-sponsored drafts, only one of which 
was subjected to a wide sector review process.
The need to use the product of a transparent, commenting process once it has 
been formulated.  
The fact that the fine-tuned balance of interests and clear blueprint for a 
transition to competitive markets achieved by the NCAER draft has been lost 
in the MoP draft.  For example, the clear deregulation of price provisions in 
the tariff section have been removed so that there is, in the MoP draft, full 
regulation of price by the state commissions; however, in the state 
commission section, there is a provision that allows the State Commission to 
permit access to a consumer class and only determine the wheeling charge 
(rather than the wheeling and supply price) for that class when it has so 
determined.   Thus, there is  an apparent conflict within the statute 
regarding the regulation of commodity priceand uncertainty regarding access 
to end users.  (There are many such examples.)

Action Item:  Either support the NCAER draft and send it to the Ministry of 
Law for legal fine tuning (Basu mentioned that the "form" of the NCAER draft 
was not right), or repeat the iterative, transparent commenting process with 
regard to the MoP draft.  hWe recommend supporting the NCAER draft because it 
reflects a balance of the multiple sector interests.  It is the first such 
document produced through an open process in India and was a process 
sponsored by the Ministry -- for that reason alone, the Ministry should 
promote and support the NCAER version.

Any assistance you can render on this issue will be greatly appreciated by 
many parties in the sector.  Let us know how it goes.

Sincerely,  
Jane Wilson
  


---------------------- Forwarded by Jane Wilson/ENRON_DEVELOPMENT on 
09/09/2000 07:51 PM ---------------------------


"Pumphrey, David" <David.Pumphrey@hq.doe.gov> on 09/09/2000 03:36:09 AM
To: "'sanjay.bhatnagar@enron.com'" <sanjay.bhatnagar@enron.com>, 
"'jane.wilson@enron.com'" <jane.wilson@enron.com>
cc: "Cutler, Thomas" <Thomas.Cutler@hq.doe.gov> 

Subject: Electricity Bill Developments


Dear Sanjay and Jane,

I wanted to again thank you for the briefings you provided during my recent 
visit to India.  Your analysis of developments in the electricity sector were 
very helpful.

As you know we are getting ready for the visit of the Prime Minister next 
week.  We have several energy events related to the visit and hope to be able 
to complete some of the "homework" that you assigned.  It would be 
particularly helpful if you could provide any updates on the status of the 
Electricity bill.  I understand that the Council of Ministers had approved it 
but I don't know if progress has been made in the Parliament.  Also there was 
a report that some aspects of the bill had been changed in the approval 
process.  Any updates would be useful for us in preparing for our meetings 
with Secretary Basu and the Prime Minister.

Thanks for any help you can provide.

David Pumphrey
Department of Energy