Maharashtra, which till the other day was power surplus, now talks of a power shortage. Supply in that state falls short of peak demand by 2000 MW.

There is talk of power cuts. Country-wide, supply falls short (by 20-30 per cent) of peak demand. There is urgent need for new power. But how do you conjure up guarantee?

Private power producers want a guarantee because they believe that the state electricity boards (SEBs) cannot pay them. Does the Central government or the planning commission believe that the SEBs can pay? Unlikely. Even so, it may be possible to work out a guarantee of sorts. In case of SEB overdues to power producers, the planning commission could cut plan allocations to the concerned states and thus provide the wherewithal for to Centre to pay power producers.

But the size of current overdues of SEBs is by no means small. Adjustments against future overdues would leave little plan allocation for the states. The guarantee arrangement could easily get over-stretched. The only way open to the Centre to honour its guarantee would then be to take-over the defaulting SEBs. That would mean a first-class Centre-state tussle since power is a state subject. That apart, what would the Centre do with bankrupt SEBs? To run them efficiently, the Centre will have to downsize staff, weed out power theft (the euphemism for which is transmission and distribution losses) and push up power tariffs: a truly hot potato (judging by Chandrababu Naidu's travails in Andhra Pradesh). Selling of SEBs could be a solution, but there will have to be takers: an unlikely prospect.

The short point is that guarantees for a few mega projects may be possible; but guarantees cannot be expanded to the scale required to overcome the nation-wide power shortage. The trouble is that Central guarantees skirt the basic issue of the responsibility of the states. This is where is logic of Central guarantees proves faulty. The States avoid tariff reform; wink at power theft; nurture over-manning; and pass the buck by non-payment of dues to Coal India, Railways, National thermal and hydel power corporations (Central undertakings all).

The states must shoulder their obligations. A related issue is power purchase agreements; in the case of Maharashtra, the agreement gave a carte blanche to Enron to have 24-hour peak (PLF) operation; this required the state's SEB to step down its PLF during off-peak hours, raising the cost of its generation even as Enron gets rewarded for stepping up its PLF above 67.5 per cent. The reform scenario has been muddied with a cock-up in power costing. Central guarantees will only add to the mess.