Vandana Gombar: Premium tariffs for 24x7 power

Brave talk of "power for all" by 2012 seems to have no relation to ground reality

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!