Energy initiatives: The highest feather in PM Modi's hat

If there was one sector which was the centre point of Prime Minister Narendra Modi’s speech at the Red Fort, it was the energy sector. From the coal auction to #GiveItUp campaign for LPG connections, the PM and his government has indeed scored a point. Adding a new target for the power ministry, the PM announced electrification of 18,500 villages in 1000 days.

The first ever auction of coal blocks garnered revenue of close to Rs 2.95 lakh crore till yet for the mineral rich states. Coal block allocation done over the past two decades was struck down by a Supreme Court order in August 2014. After the first phase of auction in February 2015, an elated Piyush Goyal, minister of state for coal, power and renewable energy told Business Standard – “We did in 4 months what past government couldn’t in 10 years.”

PM said from Red Fort – “Timely auctions of coal & spectrum saved Rs 3 lakh crore.” And former UPA government’s finance minister P Chidambaram retorted on social networking site Twitter – “Welcome auction of natural resources. First auction of Spectrum done by UPA. First auction of coal blocks done by NDA.”

He was quick to also point out that the ‘Direct Benefit Transfer of LPG (DBTL)’ was UPA’s idea which now the PM is taking credit of. “Happy that PM endorsed Direct Benefit Transfer. UIDAI Aadhaar & DBT conceived & implemented by the UPA Govt. Happy they continued." – Chidambaram said on his Twitter handle.

The programme for providing LPG connections to BPL households is independent of the Prime Minister's campaign. Under the United Progressive Alliance (UPA) government's second term, IndianOil, BPCL and HPCL were asked to provide LPG connections to BPL families with a one-time financial assistance of Rs 1,400. The plan was to cover 3.5 million families annually in 2010-11 and 2011-12, but the target remained elusive.

PM said in his speech that “20 lakh people have given up their gas subsidy and providing direct subsidy has stopped theft, saving Rs 15,000 crore.” In his typical anecdotal style of speaking, the PM also recounted the pain poor families go thorough while burning fossil fuels for their cooking needs. He urged the nation yet again to give up their LPG subsidy to help light the stove in a poor household.

However, for any connection given up, there is no mechanism so far for providing a matching subsidy or connection to the poor. PM also said in his speech, “we have taken gas pipeline connections to households where there is no proper water pipeline even.”

There has actually been a jump in the number of below-poverty-line (BPL) households being provided LPG connections as part of the corporate social responsibility (CSR) programme of the three state-owned oil marketing companies (OMCs). Around 1.6 million BPL connections had been added in the six months from January 1 to June 30, 2015 – a recent report by Business Standard revealed it.

As for coal, though the fuel issues have been resolved. Coal imports are down by 11% (YoY in July 2015) and power generation increased by 5.5% during last quarter. There are still power evacuation and distribution issues with state power utilities under financial stress. With the PM announcing that around 18,500 villages to be electrified in 1000 days, last mile connectivity for power would need to be resolved as soon as possible.

In their maiden budget, the NDA government announced two schemes for strengthening last mile power connectivity – Deen Dayal Upadhyay Gram Jyoti Yojana (DUGJY) for rural areas and Integrated Power Development Scheme (IPDS) for urban areas. The progress has been though slow. IPDS is yet to be launched from PM's constituency Varanasi with the event cancelled twice. There is no monitoring on DUGJY till yet.

With power generation reaching its saturation point, the next level of investment needs to come in transmission and distribution. But once a haven for infrastructure major investment, the power sector is now bereft of capital flow. Past delays still haunt the sector, with Rs 2.5 lakh crore worth of projects feared to become non-performing assets (NPAs) with the banks soon.