The Indian Government is currently thinking of allowing private sector companies to participate in power sector by inviting them to generate electricity mainly from coal. The main motivation is resource mobilisation from private sector, since the Plan funds are being diverted to rural development away from the power sector. The paper analyses the inherent difficulties and contradictions in the Government's proposal, such as co-existence of high cost private power and low cost public power, the potential goal-conflicts of private & public utilities and the constraints in raising finance. It suggests a different model for making the privatisation proposition feasible.