Seb Reforms Necessary To Solve Power Crisis: Plan Panel Member

Indias plan to step up power generation hinges crucially on assured fuel supply and timely payments by state power utilities to private producers, Planning Commission member M R Srinivasan said on Wednesday.

These issues continue to bedevil the pace of finalisation and execution of power projects, Srinivasan told a seminar entitled `Energy & Infrastructure beyond the Millennium.

The gathering was staged by the Independent Power Producers Association of India (IPPAI) 30 firms that produce 20,000 mw across the country.

During the eighth plan (1992-1997), India could add only 17,668 mw of generation capacity out of a targeted 30,537 mw, as some projects got delayed.

In the ninth plan (1997-2002), India aims to add 40,226 mw about 17,500 mw less than the required 57,735 mw.

In the eighth plan, the state electricity boards (SEBs) could add only 6,836 mw of the projected 14,870 due to lack of funds.

The private sector added 1,430 mw of the proposed 2,810 mw, delaying some projects since payment security from SEBs were not forthcoming.

The issue of payment security is hinged to the financial state of the SEBs, said IPPAI in a report.

The SEBs, the only buyer and distributor of electricity, shoulder massive financial subsidies selling power to farmers at far below production costs.

The subsidised agricultural tariff resulted in inadequate inflow of funds and hurt the financial health of SEBs.

The SEBs reached a state of acute financial distress, Srinivasan said.

The power producers have asked for guarantees from the state and the federal governments to offset any risk of a default by SEBs in making payments.

The negotiations for such guarantees have halted the progress of many power projects.

To create conditions suitable for attracting private investments, changes are called for in the policies on management of SEBs and the tariff structure to be charged by them, the IPPAI said.

Private power producers also complain about a lack of rules on assured supply of fuels to power plants.

The state-run oil and coal firms have said they would not be able to supply sufficient quantity and quality of fuel to power plants.

The long-run issue depends on how diversified our energy sources become, Srinivasan said.

Since natural gas through cross-country pipelines is not available, the import of liquefied natural gas is a near-term supplement, he said.

Srinivasan said India should look at the option of nuclear power in a more confident way. The countrys reserves of thorium, the fuel for nuclear plants, equalled 1,200 billion tonnes of coal.

But power producers said that apart from fuel constraints, the main hurdle amounted to laws that govern generation, distribution and transmission of power.

India is considering tariff reforms through changes in the distribution policy and establishment of regulatory bodies, Power Secretary E A S Sarma told the conference on Tuesday.

While the bill on setting up regulatory panels was pending with Parliament, the proposals for overhauling distribution would be ready by March, Sarma said.

Meanwhile, excess power from the eastern grid will start flowing to the power deficit areas in the southern region from early next month. Announcing this, Union power minister Y K Alagh said here yesterday that arrangements have been made to transfer 350 mw of excess power from super thermal power plants in Orissa and West Bengal to Kerala in the southern grid which has been facing power shortages for the past few months.

He admitted that transmission and distribution systems in the country were inadequate, and the government could not transfer power out of the areas where it has been in surplus since October 1997 to areas where there is a deficit.

Similarly, the 400 kv Bawana-Hissar line could not supply power to South Delhi because the local government did not have the transmission infrastructure in place, and power had to be routed through Dadri and Noida to these areas only because of a gap of just a couple of kilometers.

Alagh regretted that his government could not get the power transmission bill approved by Parliament despite clearance by the parliamentary committee.

He said transmission and distribution would be the top priority of his ministry.

Alagh said most of the power stations in the country were being manned by inadequately trained manpower, and the government has set up a committee to identify training areas for the 20 lakh strong staff engaged in transmission activity across the country.

The other thrust area identified by his ministry was renovation and modernisation (R&M) to increase efficiency of existing plants, alagh said.

The Power Finance Corporation (PFC) has already cleared 43 out of the 60 R&M projects it received, and nearly half of these had some involvement of the private sector, he said.

The minister said the R&M programme would continue through the ninth plan and the government would pump in about Rs 800 crore through the PFC for this sector.

He said 21 projects involving 7500 mw of power had achieved financial closure with domestic financial institutions, and another 50 were jostling for financial closure, with the government having given all clearances to them. This is a opportunity for foreign investors, as these projects involve investments to the tune of over $ 4 billion and these projects have satisfied one of the most stringent banking norms to achieve financial closure, he said