Power without ability

Limitations in project execution capability bedevil power sector

Two seemingly disparate statements by the Union ministry of power in the past month are confounding in that they portend two very different scenarios for future capacity addition in the domestic power sector. The first, disturbingly familiar, was a sombre announcement that the 11th plan target of 78,000 Mw would be missed by more than a third. The second announcement, more heart-warming, was that India would add over 20,000 Mw of power during FY 2012. A simple extrapolation of the second announcement would imply that India has developed the capacity to add over 100,000 Mw in a five-year period, exactly what the 12th five year plan envisions. So, has India’s power sector turned the corner in meeting the ambitious goals it has set for itself? It would be tempting to assume it has, but the reality on the ground is less palatable. A nuanced look at the data suggests that a significant portion of the 20,000 Mw that would purportedly be added to the existing capacity this year is from projects that should have come on stream long ago, but did not, owing to the familiar inefficiency in project execution. The cumulative generating capacity that was to be added in the 11th and 12th plans is 178,000 Mw. Given the shortfall in the 11th plan, approximately 128,000 Mw (or approximately 26,000 Mw per annum) would have to be added during the 12th plan to be “at-par”. The record of the power sector to date does little to engender confidence that this challenging target would be met.

The inability of the domestic power sector to leverage the considerable latitude provided by the landmark Electricity Act (2003) is well-documented. Problems with land acquisition, the inability of most new entrants to secure fuel linkages for existing and planned power projects and delays in getting environmental clearances have all led to frustrating delays in projects getting off the ground. Liberalisation in power generation (the Electricity Act also allowed more limited participation in transmission and distribution) was expected to provide a much-needed efficiency boost to the private sector. Unfortunately, that has not happened. Even as the private sector is undeniably affected by these problems, an equally daunting shortcoming is in project execution capability. This weakness is reflected most visibly in the inability to mobilise the labour and capital needed to execute projects in a timely manner. The shortage of a skilled workforce has emerged as a major constraint on infrastructure growth. China has shown the way forward with its abundance of technical training institutes. Singapore is willing to invest in such institutes as long as it can make money doing so. While “learning by doing” is a good way of training people, it is not necessarily the best way. A coordinated plan to mitigate the problem of skills shortage and inadequate project implementation capability, using foreign, including Chinese, capital and skilled manpower if necessary, is urgently needed if India has to dramatically improve the power situation.