Historical Evolution of Electricity Supply in independent India, 1947 to 1992

This is the third in a series of articles on the class struggle over electricity in India

The official position regarding the generation and distribution of electricity in our country today is the opposite of what the Government of India declared in 1947.  It was proclaimed at that time that the State should take full responsibility for providing electricity to everyone and all over the country, at an affordable price. Why has the policy for the power sector been completely reversed? To address this question, it is necessary to study the history of evolution of the power sector within the context of the evolution of the bourgeoisie and the capitalist system in our country.

When India became independent in 1947, the country had a power generating capacity of just 1,362 MW.  Generation and distribution of electrical power was carried out primarily by private companies. Power was available only in a few urban centres. Rural areas and villages did not have electricity. Rapid growth in generation and distribution of electric power sector was a necessity for further development of capitalism in all spheres of the economy.

The policy for the power sector adopted after 1947 was formulated in line with the vision document called the Bombay Plan, which was drawn up by the Tatas, Birlas and other big business houses in 1944-45. At that time, even the wealthiest of Indian capitalists did not have adequate capital to invest in energy, heavy industry, and other infrastructure required for industrial growth. They proposed that the central government should use public money to set up basic infrastructure, including the generation, transmission and distribution of electric power. The big capitalists would concentrate on consumer goods where the capital requirement is low and expected profits are both high and quick.

The Electricity Act of 1948 was based on the recommendations of the Bombay Plan. State Electricity Boards (SEBs) were formed in all the states of the Indian Union.  They were made responsible for the supply of electric power within the territory of that state.

In addition, the Act of 1948 also allowed private licensees to distribute and/or generate electricity in the specified areas designated by the concerned State Government/SEB. This ensured that the Tata group, which was generating and distributing electricity in Mumbai, and the Goenka group distributing electricity in Kolkata, could continue their operations and grow along with the state sector.

The Industrial Policy Resolution of 1956 reiterated that the generation, transmission and distribution of power would be almost exclusively in the public sector. A huge amount of public funds was invested in setting up generation plants and transmission lines by central government owned companies – namely, the National Thermal Power Corporation (NTPC), National Hydro-electric Power Corporation (NHPC), National Power Transmission Corporation (NPTC) and Power Grid Corporation (PGC).  Bharat Heavy Electricals (BHEL) was established to manufacture power generating equipment.

The policy of relying on state-owned companies continued as long as the Indian monopoly capitalists benefited from it.  In the 1980s, there was tremendous pressure on India from the western imperialist states, operating through the World Bank and IMF, to reduce import duties and ease restrictions on foreign capital investments. The Tatas, Birlas and other business houses had built up their domestic empires by restricting foreign competition. They now recognised the need to lift those restrictions so as to become globally competitive. However, they did not want to open up the Indian market too rapidly. They adopted a policy of gradual opening up of the economy to foreign goods and foreign capital.

The 1990s began with major abrupt changes taking place on the world scale, accompanying the disintegration of the Soviet Union.  The tide of world revolution turned from flow to ebb.  The development of capitalism in our country had reached a stage when Indian monopoly houses had started viewing foreign capital investment in the country as a factor that could accelerate their own global expansion. This change in the outlook of Indian monopoly capitalists led to their open embracement of the program of globalisation, through liberalisation and privatisation, in 1991. They abandoned all pretence of building a socialistic pattern of society.  They repeated the imperialist mantra that everyone must fend for oneself in the market, and the State is only responsible for creating a favourable investment climate, which means a climate favourable for capitalists of any country to invest and reap maximum profits.

Having used the public sector to build up their private empires, the monopoly houses decided that the time had come to grab hold of public assets at a discount, to further expand their private empires.  Having built up their industrial base by restricting foreign competition, they decided that it was time to lift those restrictions in the interest of becoming globally competitive.

In sum, the maximisation of private profit in the hands of the wealthiest monopoly capitalists has remained the overriding motivation of government policies, laws and regulations in post-colonial India.

In the early decades, the policy of creating and expanding state-owned companies served to create the infrastructure for industrialisation, so that the industrial houses could dominate the market for manufactured consumption goods and reap maximum profits. In the present period, the pursuit of maximum monopoly profits is being served by the agenda of globalisation, through privatisation and liberalisation.

It is the interests of monopoly capitalists which dictated the policy of the State taking total responsibility for power generation to distribution in 1948.  It is once again the interests of monopoly capitalists which have dictated the program of privatisation since 1991.  When they could not afford the required investments they wanted public funds to be invested in the power sector. Now that they have amassed wealth enough to be amongst the richest of the world, they want the state-owned companies to be handed over to them.

Read the Second part: Crisis of Electricity Supply and its Real Cause

Read the Fourth part: Privatisation of Electricity Generation – False Claims and Real Aims

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