Power woes

Submitted by VK Gupta on Tue, 18/11/2014 - 10:44am

http://epaper.dailypostindia.com/Details.aspx?id=118008&boxid=61575&uid=...

vinod kumar Gupta
Cost of supply of power to consumers is going to increase due to over- dependence on

power purchase from private sector and forcing their own state-run units on forced closure

Power woes
There is an urgent need to place an alternate agenda for the reforms in power sector by the new government at the Centre for power sector development in the country to meet the national aspiration of electricity for all at affordable cost. While the Electricity Act 2003 has worked well in strengthening India’s power sector to some extent, it has also underlined the weakness of the new institutional mechanism. The problems of present day power sector include cash-strapped power distribution companies, their tariff capped, power transmission constraints, lack of political will to curb the menace of power theft and over-dependence on private sector.

The purpose of Electricity Act 2003 was to improve the performance of power sector by bridging the gap between demand and supply, reduce the aggregate transmission and commercial (AT&C) losses in power sector, improve the financial health of the sector and reduce the subsidy burden of the government. But due to faulty execution of policies, the financial health of power sector has further deteriorated and the government is now even subsidising private power distribution companies (DISCOMS). The review of Electricity Act 2003 is an imperative need and must be undertaken to assess its strength and weakness. A status report on the experience of the implementation of Electricity Act 2003 should be placed before the public before going ahead with proposed amendments.

The UPA government had proposed last year an amendment to Electricity Act 2003 to separate content and carriage in distribution. There will be one single distribution company which will be responsible for maintaining the distribution network and there will be several supply licensees in the same area. Multiple supply licensees at the same area of operation is aimed at retail competition thus to tide over the impractical proposal of multiple distribution licensees existing in Act 2003. The power generation capacity in the country is 2,50,256 mega watt (MW) but the maximum peak demand met was 1,39,320 MW in July this year. The power supplied in the month of July 2014 was 91,069 billion units against last year supply of 83,211 billion units in July 2013 which is an increase of 9.4 per cent.

The average coal availability stock at thermal plants of the country is just sufficient for seven days. Twenty four thermal plants out of 100 that are being monitored by Central Electricity Authority (CEA) have less than four days coal stock is leading to forced outage of thermal units.There is over 20,000 MW of stranded generating capacity due to coal shortage. Coal India is not supplying full quantity of coal to the thermal plants which have already been completed. These plants are being asked to go for imported coal which will increase generatingcost for which there may be few buyers. The cost of supply of power to consumers is going to increase due to over- dependence on power purchase from private sector and forcing their own state-run units on forced closure.

The concept of achieving low tariffs through competitive bidding in Ultra Mega Power Projects (UMPP) has been completely defeated by the changes made in terms of reference after award of contract by giving various concessions to successful bidders. The government policy to set up mega nuclear parks with imported plants is bound to fail due to high capital costs. While Indian nuclear plants are competitive these need to be encouraged instead of mega nuclear plants. Distribution reforms, especially in rural sector, have remained the most challenging in power sector reforms. The

tariff for low capacity consumers is less than the cost of power purchased by the power distribution companies (Discoms), which resort to unscheduled power cuts though the power may be available from generating stations due to economics involved in them.

Distribution franchise working in Agra has miserably failed. According to CAG report, UPPCL has already incurred a loss of Rs 489 crore in two years and shall incur a loss of about Rs 5,341 crore in next 18 years due to Agra franchisee. Same is the story of Nagpur, Aurangabad and Jalgaon where franchisee is not paying to MSEDCL and owes more than Rs 500 crore as dues of power purchase. The government has overlooked the cases of state sector Discoms of Andhra, Tamil Nadu, Karnataka and Punjab where the AT&C losses were reduced under public sector ownership. The practical model adopted by Andhra Pradesh Eastern Discoms and Punjab have actually achieved remarkable results in reduction of AT&C losses could be considered and adopted by the other states having higher level of AT&C losses as an alternative to the proposal of input based distribution franchise or any other model of privatisation.

To improve the power system and to ensure there is no power theft, Punjab model of reduction of distribution losses departmentally must be introduced throughout the country and the government should also provide benefits of financial restructuring plan (FRP) to those states where the AT&C losses have been reduced under public sector ownership. AT&C losses in Punjab have been brought down from over 25 per cent to 17 per cent with shifting of about 20 lakh domestic meters to outside their premises will be further brought down to 14 per cent after all the meters are shifted outside the consumers premises.

Inadequate transmission structure to transmission power from one region to the other is the main constraint for power shortage in southern states though surplus power from different sources is available in other regions. The expansion in transmission system in the country has not matched with the capacity addition. What is more serious is that due to continued wrong energy policies, banking sector may collapse under the burden of non-performing assets being generated by the power sector. The UPA government never tried to diagnose the problems faced by power sector but only tried to treat the symptoms. The aims and objectives which were sought to be achieved through the enactment of Electricity Act 2003 have not been attained as envisaged. It is now acknowledged that majority of regulators have not been able to function independently of the state government and political forces as envisaged in the Act with the result that the gap between the cost of power and the revenue realised could not be bridged.

(The writer is a functionary of All India Power Engineers Federation)