Arpita Mukherjee Ramneet Goswami January 2009 - icrier

and New Zealand, used the Build-Operate-Own-Transfer (BOOT) mode to attract foreign
investment. 32
Liberalization allowed alternative providers to enter the market to supply services such
as metering, billing, maintenance, repair, installation, and upgrading activities for oil, gas and
electricity services. Privatization and regulatory reforms made it possible for companies to
switch quickly between fuels and bundle energy services in innovative ways. For instance, oil
and gas companies can now own electric plants; and electric utilities can have stakes in gas
pipelines. An increasing number of utility companies, oil companies and energy equipment
manufacturers started building on their respective competencies to supply energy services on
a more integrated basis. The companies are now competing to provide a full range of energy
asset and energy facilities management services which benefit both customers and
companies. Customers benefit since they are able to purchase a range of fuels and equipment
combined with supporting services at a lower cost from a single supplier and this made the
companies particularly successful with large industrial and commercial customers. The
process of deregulation in network industries (telecommunications, electricity, gas,
transportation, etc.) led to new types of regulations (independent regulators), pricing
mechanisms and market structures. The regulators imposed Universal Service Obligations
(USOs) 33 which forced energy utilities to supply service in a continuous manner, to meet the
needs of all customers, and provide it at the minimum possible price.
The growth of integrated service providers led to specialization. Some energy
companies gravitated toward asset-based strategies focusing on energy manufacturing and
energy delivery. Others focused on energy trading. The industry also witnessed mergers and
acquisitions as companies tried to optimize their mix of goods and services. In the US, 22
mergers, worth US$56 billion, were announced between 1997 and 1999. Similar trends were
visible in the European energy companies. Cross-border mergers and acquisitions also
increased. In the electricity sector alone these transactions increased from US$20 billion in
1996 to US$38 billion in 1999. 34 Mergers and acquisitions and the growth of large players
have raised concerns about anti-competitive practices.
2.1.1 Coal
The liberalization process in different sub-sectors is given below.
The structure of the coal industry has undergone considerable changes – from being a
state-owned monopoly catering to the domestic market to an internationally competitive
sector. Till the 1970s, isolated national producers dominated the coal industry. The oil crises
in 1973 and 1979 initiated a series of reforms leading to rapid development of the
international coal market. Many countries in Latin America, Africa, Eastern Europe and
Central Asia introduced reforms in mining services in order to attract private sector
investment in exploration and production (E&P) activities. With the opening up of the sector
for foreign competition, governments started reducing subsidies and multinational
corporations such as Anglo American, BHP Billiton, CONSOL Energy Inc., RAG Group and
Rio Tinto with specializations in key activities (such as mining) entered this sector, gradually
replacing the local coal producers. For instance, in Russia until 1993, the majority of the coal
industry was state-owned and private producers accounted for less than 10 per cent of total
32
BOOT is the same as BOT, except that instead of receiving a fee for operation, the private entity receives a net
income from the asset.
33
To provide a legal obligation to serve all customers, including those that may not be commercially attractive.
34
Evans, P.C. (2002).
13