Brave talk of "power for all" by 2012 seems to have no relation to ground reality
Vandana Gombar / New Delhi Sep 08, 2009, 00:33 IST
People can be given an option to get reliable 24x7 power at premium tariffs or opt for the cheaper power with zero reliability. It would be like number portability for the power sector.
The proliferation of personal vehicles across the country — two-wheelers and four-wheelers — is a direct result of the failure to develop a decent and comfortable public transport system. In the power sector, this search for a similar “personal” solution has led to a buoyant market in power back-up equipment. A whopping Rs 100,000 crore or about $20 billion has been invested by households and companies in back-up power equipment, according to a recent study commissioned by Wärtsilä India.
To top it, another Rs 30,000 crore is the spend every year to keep this equipment humming as in many areas like Gurgaon and Faridabad, the so-called back-up power is the main source of power supply.
These should be sit-up numbers for policymakers.
Back-up power is expensive and polluting (think diesel gensets) though it is better than no power at all when seen from the users’ perspective. Clearly, it points towards a sub-optimal allocation of resources. If Rs 100,000 crore had been spent on setting up a thermal power plant, its capacity would have been over 25,000 MW. That would have covered the peak deficit of 13,500 MW recorded in July this year twice over.
The obvious thing to do is to funnel the spend capacity of individual consumers and companies towards the actual construction of large-scale power plants. This construction needs to be incentivised. One way of doing it is to allow these plants to cater exclusively to those who have the ability and willingness to pay higher charges for the power they consume. If there is a willingness to pay anywhere upwards of Rs 10 per unit of power from a diesel genset — as long as the power is assured — why not create a new power market?
There is an existing alternate market model which has been tried in Pune city to assure 24x7 power. A premium is charged from all households consuming above a certain minimum threshold which goes towards buying expensive power to plug the demand-supply gaps. I think we can go further. I think people can be given an option to get reliable 24x7 power at premium tariffs or opt for the cheaper power with zero reliability. It would be like number portability for the power sector, allowing the user to choose the supplier of power. For something like this to succeed, we would need to operationalise “open access” — which has seen scant progress in the country for various reasons.
There is of course another way of mobilising funds for investing in power plants without tinkering too much with the end-tariffs. I bring back the transportation example here. There is a nominal cess we pay on diesel and petrol to part-fund the building and maintenance of national highways. Is there a case for a cess on our power bills to fund the construction of new plants? Wärtsilä’s Managing Director Rakesh Sarin suggests a reliability surcharge of “as little as 50 paisa per unit” can support rapid capacity buildup. This would be far less than what consumers are shelling out today, and it is not just the better-off consumers who are paying atrocious rates for private power. I have seen a cluster of small-time shopkeepers paying a neat monthly sum of a few hundred rupees to get connected to a power back-up connection (generator) in the area.
Any cess, however, which leads to even a marginal tariff hike could be a political hot potato. In the political decision-making space, free power is still the way to go even if there isn’t enough to go around and even though examples abound of people having to pay for the lack of an efficient market-led power sector. Its drag effect on the economy can only be guessed, since there is no scientific way of estimating the production units that did not come up due to power shortages.
Again going back to telecom, there are almost half a billion telephone subscribers in the country and if they can afford a telephone, they surely can afford to pay their power bills, and a cess too. We can’t, however, expect people to come forward and volunteer to pay.
None of these are issues that are being debated at good old Shram Shakti Bhawan. There is the NTPC-RIL gas dispute to deal with. There is the age-old problem of delays in under-construction power plants. And then there is the brave talk of “power for all” by 2012, which, at this moment, seems to be a slogan coined in jest, with no relation to ground reality!
Mr. Srinivasan. I agree with the T&D losses argument and actually this is not due to losses but due to theft but corporations as well as individuals. But who says it is the "moral" duty of Govt to provide power? Havn't we seen the case in telecom... When BSNL was there then it took months to have a phone line which was extremely unreliable and now it takes hours to get a landline as well as mobile phone. Generally (Actually almost always) governments are inefficient in running businesses and we should run almost everything (Except defense, police etc.) like a publically listed company. Govenment's job should be governing agency, policy maker rather than operating agency. Privatize and create competition, govern the anti-competitive and create a healthy market, which I believe decades away until the political will is there.
Author is spot on the issue and it will be a great debate towards creation of a framework for bridging gap between demand and supply.
Posted by: vkannan
September 09 , 2009, 11:18 IST
Regardless of who runs utilities, everyone has a right to good and reliable infrastructure. Every citizen has a right to protection against profiteering. "Fair" pricing will not happen without sensible controls and enforcement. One has to only look at what happened in California a few years ago to see what might happen. Have we forgotten those lessons already?
Whether one calls it a premium or a cess, all consumers, including most certainly those whose needs are being met by T & D losses, need to pay a fair price for power. The power sector has been consistently missing targets for installation of new capacity - the effect of this on economic growth would have been even greater if more of India's GDP had been coming from manufacturing than from services. The entire infrastructure story will unravel if the services are not sensibly priced.
The author has conveniently ignored the moral hazard issue. It is the basic duty of the government to provide good quality power AND water to the people. While water, capable of being stored, can be supplied for shorter durations, power, which cannot be stored, has to be supplied 24/7. To ask anyone to pay a premium for this is to incentivize incompetence and failure. For the last 60 years and more, the Ministry of Power at the Centre and the Power Departments in the states are guilty of playing politics, giving power away free to large sections of the population and winking at blatant power theft. The author cannot be aware that total T&D losses in the Power sector are more than 35%. If these are brought down to international levels of below 12%, there may be no need for us to build too many power plants at all. The author should also realize that cess is a highly regressive form of taxation.
What next...lets pay a cess for potable water, a lesser cess for flushing water, why not one for clean air? This is a slippery slope. Soon, we will find that we are paying all of our income in cesses. The less fortunate are as much deserving of better infrastructure, transport, clean air, water and reliable power. They are perfectly capable of modulating their needs to their economic situation. Business enterprises should stand on their own, and should be able to generate surpluses to reward investors, to invest in expansion and new technology and so on. "Cesses" must cease. It is unfortunate that we seek to penalise consumers as opposed to looking at ways to improve productivity. This is exactly the kind of thinking that has led us to where we are - with bad infrastructure, bad water, unreliable power etc.
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