Mr Sharma said that the power scenario in the country was ideal for investments even without guarantees. He said business was all about taking risks and taking an informed decision without any guarantees.

Replying to a CEO who had questioned the lack of government encouragement for private sector investment in the power sector, Mr Sharma said the private sector had committed close to 11,000 mw for generation so far and some of these were coming up without any sovereign guarantees or state government guarantee.

He said the government was keen on encouraging private sector investment into the power sector and was putting in place an alternative payment mechanism by which the Power Trading Corporation (PTC) would buy the power that is generated instead of the state government where the project is located. The PTC will in turn enter into a pact with the state government by signing the power purchase agreement (PPA) and assume the responsibility of payment to the generator of power.

The states will give escrow cover three months before the operation of the project. The alternative payment mechanism is being given shape and is in its final stages, he said.

According to Mr Sharma, the country will require 100,000 mw more power in the next 10 years for a seven per cent GDP growth rate. This means redoubling the installed capacity by end of the 11th Plan. Since the government cannot this on its own, it expected the private sector to contribute 50 per cent of the target. However, a long-term solution to meet the shortages and have additional capacity was to reform the state electricity boards (SEBs) and restore their financial health. The surplus power capacity of 3,000 mw now available cannot be transferred as the capacity for such transfers was limited. The government is planning to have 100,000 mw surplus generation by 2012 and wants to ensure through national grid transfer of at least 30,000 mw by the year 2012 to the power-deficit states.

The special secretary also said the government would consider taking up a security mechanism for the large-scale transmission of power in which area it wants big private sector participation. While agreeing that the government needed to look into a stable fuel policy and was taking initiatives in that direction, Mr Sharma said: "We have come to the conclusion it is cheaper to transmit power rather than transport fuel over long distances." He said the long-term fuel policy was moving towards international parity pricing.

He said the government had no intention to allow the PTC to be a monopoly. The government wants power to be traded as a commodity in the open market. The plan is to allow a private operator to get a licence for power trading and sell power in the open market. The Electricity Bill, 2000, he said, wants to encourage power trading. A number of generators will be competing and the transmitter must give the facility to open access and wheeling power. The Bill will put a mechanism in place for this.