India's 5-yr power plan: Move away from generation; focus on supply

Focus to be on affordable supply, optimum source mix, and T&D reforms

Loaded with over capacity of thermal power, coupled with tepid demand and rising share of renewable energy, India will now witness a marked shift towards efficient supply and optimum generation mix. With all households connected, and industries facing high power rates, the Ministry of Power will focus on last-mile infrastructure and rationalised tariff across the board in its five-year vision plan.

The plan was submitted to the Prime Minister's office last month. A halt in power generation through conventional sources indicates a halt in any new private investment in thermal power for the medium term.

The country's current installed power generation capacity stands at 360,000 Mw, with thermal (coal and gas) contributing 250,000 Mw. The current renewable power capacity is 80,000 Mw. The government is planning no new investment in the thermal sector, apart from the 20,000-Mw plan of state-owned NTPC Ltd.

"There is 40,000 Mw of privately-owned capacity that is under stress. CEA has already stated in its National Electricity Plan (NEP) that India would need 6,440 Mw of thermal power during 2017-22. So for now, there is no additional need for any new private investment," said an official.

The Central Electricity Authority (CEA), in its latest NEP, said 47,855 Mw of coal-based power projects are likely to yield benefits during the 2017-22 period, since they are currently under different stages of construction. This translates to a likely capacity addition of 176,140 Mw in the next five years, said the plan.

Even the private sector has not batted for any fresh capacity to be offered. Rather, its views are also in sync with the government. In their submission to the government as a reply to the draft vision plan, the Association of Power Producers (APP) said, "Demand supply projection should ideally form the basis for the vision. It presently does not provide enough clarity on the generation capacity planned and the shortfall projections. There is also no mention of the generation mix desired to ensure that day's load and peaking loads are met."

But at the same time, power demand is half of the installed capacity. As on July 2019, peak power demand was 176,000 Mw. The two prime reasons for this are no spike in demand from industry and financially beleaguered state-owned power distribution companies.

To address the two issues, the power ministry is looking at rationalised tariff and a new set of reforms for the discoms. The earlier scheme, UDAY, launched in 2015, has largely been unsuccessful in turning around the discoms as they stare at losses to the tune of Rs 28,369 crore.

Finance Minister Nirmala Sitharaman, in her budget speech this year, said that UDAY needs to be reviewed. The ministry of power is planning UDAY 2.0, aimed at only improving operations of the discoms.

Operational management would also lay down tariff rationalisation measures, reduce cost of power for end-consumers and build a sturdy distribution network. R K Singh, Union minister for power, told this paper that UDAY 2.0 would be launched with a focus on loss reduction.

The new vision plan will also look at enhanced investment in transmission infrastructure, especially to connect the renewable projects. 

Regarding tariff reforms, the vision plan has proposed reducing rates for industries by reducing the cross-subsidy charges levied on large customers. This proposal would be part of the upcoming Tariff Policy 2020. Reduction in number of tariff slabs – especially subsidised ones, cost efficient mix of power supply and time of the day tariff.