New Document top_band
 
Business Standard

Ajay Shankar: The odd conundrum of India's power sector

When electricity has been available, there have been no buyers distribution companies simply haven?t the money to buy more power

Related News

India’s today presents a truly . The country experienced a paradigm shift when, in 2011-12, it added new capacity of over 20,000 Mw. This capacity addition is of the same order as India used to achieve in a whole Plan period over the last few Five-Year Plans. Over the coming months, this capacity would stabilise and be ready for .

This should be cause for celebration, as one should expect a substantial reduction in power shortages and easing of the power supply position. A major constraint for small and medium enterprises would be mitigated. Use of captive diesel generation should fall sharply.

Unfortunately, those who follow the power sector do not expect this to happen, and regrettably, they are right.

In the same year 2011-12, when record capacity addition was taking place, the largest power company — the — reported a decline in its plant load factor, or , from 92 per cent to 85 per cent. While there have been difficulties with coal supply, the real reason for the decline in PLF has been lack of dispatch.

This means that at the margin, when electricity has been available, there have been no buyers. As India has a national grid where all the states are interconnected, this means that there have been usually no buyers across the entire country. There have been no buyers because the distribution companies which supply electricity to consumers cannot afford to buy more electricity — because they do not earn enough to pay for what they have been buying.

In 2009-10, for the country as a whole, they took Rs 30,000 crore as subsidy from state governments — and still had losses of Rs 27,000 crore. At their tariff levels they lose money at the margin, so they need to restrict purchase and supply. This was dramatically highlighted in the front-page stories last week on power cuts in the sweltering heat in areas around Delhi even as power was actually available on the grid — and that too at prices which were not too high.

Here is the real irony. In electricity the distribution business is regulated to take care of the consumer and to protect him; the supply of electricity being a natural monopoly. From state regulation, India went in for independent Regulatory Commissions with great hopes as a part of power sector reforms.

But the dominant populist mindset nurtured over a generation whose natural response is that prices/user charges must not be raised — and that accounting, linguistic ingenuity, or diktats can somehow generate a “free lunch” (or free electricity, in this case) — has led to a situation in which the poor consumer cannot get the electricity that is available, and that too at fairly reasonable rates, but must suffer power cuts.

Instead, the consumer is forced to spend far more for back-up personal arrangements through captive highly polluting and noisy diesel generation — or, more likely, to suffer the sweltering heat. India’s small and medium enterprises, the natural engines of growth and employment generation, are unthinkingly prevented from achieving their full potential and put to great competitive disadvantage. In the guise of protection, the consumer is actually denied choice.


The writer is Member-Secretary of the National Manufacturing Competitiveness Council and a former secretary of the Department of Industrial Products and Promotion. These views are personal

Read more on:   
|
|
|
|

Read More

New lenses on the world's energy

The world's transition away from coal and oil depends crucially on national political structures

Most Popular Columnists

Mihir S Sharma

Mihir S Sharma: Eminently funny historians
Mihir S Sharma

Hindutva historians totally deserve to be read

Surinder Sud

Surinder Sud: The nitty-gritty of nanotech
Surinder Sud

This technology has potential uses in many sectors but India needs to invest more in R&D to reap the benefits of this fantastic science

Ajai Shukla

Ajai Shukla: Midwifing new aircraft
Ajai Shukla

With no discernible hand at the tiller, the defence ministry seems directionless and inept. The caretaker minister, Arun Jaitley, appears to have ...

Advertisement

Columnists

Agnikalam

Agnikalam: Indian Railways - nostalgia and reality
Agnikalam

Travelling by rail in India was once a pleasure, but has now become a forbidding challenge

Barun Roy

Barun Roy: Singapore's skyrise gardens
Barun Roy

Vertical gardens are a cornerstone of the state's development plan and can be a game-changer in its quest for greater sustainability

Alok Sheel

Alok Sheel: Rebooting the G20 framework
Alok Sheel

Instead of targeting global imbalances per se, the narrative must change to the structure and direction of such asymmetries

Back to Top