Category: Power

Electricity reforms – missing the wood for the trees

On the eve of a meeting with state power ministers to discuss comprehensive reforms in the power sector, in a free-wheeling interview with a leading business daily, union power minister, RK Singh has come up with four ideas viz. (i) cross-subsidy will be restricted to 20% from fiscal year 2019-20; (ii) tariff hike to cover losses of state electricity boards [SEBs]/power distribution companies [PDCs] will be capped at 15% from April 2019; (iii) innovative measures to reduce technical and commercial [T&C] loss of SEBs/PDCs and (iv) direct benefit transfer [DBT] of power subsidy. If, the multitude of problems facing the power sector including huge recurring losses of SEBs/PDCs could be solved by issuing diktats, this could have been achieved long ago. During...
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Power reforms – piecemeal measures won’t work

The union power minister, RK Singh has convened a meeting of state power ministers to discuss comprehensive reforms in the power sector to discuss among others measures (i) to uphold sanctity of power purchase agreements [PPAs] between generators and state electricity boards [SEBs]/power distribution companies [PDCs]; (ii) curbing wasteful electricity consumption; (iii) remove cross-subsidy surcharge and  (iv) direct benefit transfer [DBT] of power subsidy. Before discussing the reforms at the outset, it is important to take cognizance of the problems facing the sector and the source of their origination. First, SEBs/PDCs, the life-line of power sector are incurring huge losses – a phenomenon seen for over two decades. Unable to make timely payments to power generators – public sector undertakings...
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Cheaper power to SEBs – let center not act spoiler

For India now progressively moving towards an energy use configuration that is environment friendly [increase in share of non-fossil fuel such as nuclear, solar, wind, hydro etc], a steep decline in the cost of power generation based on solar and wind to level even below Rs 3 per unit – enabled primarily by reduction in the cost of equipment and services – has come as a boon. The state electricity boards [SEBs]/power distribution companies [PDCs] are keen to be a part of this transition and would like to procure power at a lower rate so that this benefit can be passed on to consumers. Besides, this will also help them in reducing losses and make their operations financially sustainable so...
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Don’t switch-on DBT for power without reforms

Recently, during an interaction with a leading economic daily, Union power secretary Ajay Kumar Bhalla gave an indication of the government’s intent to launch direct benefit transfer (DBT) to disburse power subsidy. Alluding to a clutch of pilot projects for DBT-Power to be launched soon, he exuded confidence that this will help curb wasteful electricity consumption, limit subsidies to the really needy, stem losses of state electricity boards (SEBs) and power distribution companies (PDCs) and reduce tariff for industries. The move is prompted by the claimed success of DBT for giving LPG subsidy and similar initiatives in fertilisers and food grains. Has the idea yielded the desired outcome in LPG? What is the current status in other areas? Is it...
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DBT-Power – It’s a non-starter

Recently, during an interactive with a leading economic daily, union power secretary, Ajay Kumar Bhalla gave an indication of the government’s intent to launch direct benefit transfer [DBT] for giving power subsidy. Alluding to a clutch of pilot projects for DBT-Power to be launched soon, he exuded confidence that this will help in curbing wasteful electricity consumption, limiting power subsidies to really needy and denting losses of state electricity boards [SEBs]/power distribution companies [PDCs]. It will also help bring down current hefty tariffs charged from industrial customers. The move is prompted by DBT success for giving LPG subsidy and similar initiatives for fertilizers and foodgrains. Has the idea yielded desired outcomes in LPG? Has it really been kicked off in other...
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SEBs woes – generators can’t escape blame either

Recently, Yogi – government in Uttar Pradesh [UP] cancelled a number of power purchase agreements [PPAs] that were signed in the past by state electricity boards [SEBs]/power distribution companies [PDCs] with independent power producers [IPPs] under MOUs [memorandum of understanding] route. The reason given was that cost of purchasing power under these agreements was substantially higher [in some cases even double] than the average cost of purchase @ Rs 4 per unit. In view of surplus availability of power in the state, the government hopes to lower overall cost even while meeting all its requirements. In turn, this will help reduce losses of SEBs/PDCs in the state. The galloping loss of SEBs/PDCs [as on September, 2015, their accumulated loss stood...
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Crack the whip on power thieves

A big headache for Modi – government is galloping losses of state electricity boards/power distribution companies [SEBs/PDCs]. This had a debilitating impact on their ability to supply electricity to consumers and industrial/business establishments despite plentiful availability [courtesy, huge step up in production and timely supply of coal to generating stations besides big boost to renewable energy]. The logic is simple. Since, SEBs/PDCs are perennially incurring loss [as on September, 2015, their accumulated loss stood at Rs`380,000 crores and outstanding debt at Rs`430,000 crore], they are unable to make timely and full payment for their purchase from independent power producers [IPPs]. So, the latter suspend supply which former cannot make up by increasing generation from their own plants either as due...
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UMPPs – stop treating generators with kid gloves

When, subsidies and in turn, fiscal deficit gets out of control, the eyes of the whole nation are set on it and all institutions, experts and financial wizards frantically look for steps to set things right. But, when it comes to dealing with factors that cause hike in subsidies/deficit, everyone turns a nelson eye; instead of taking corrective measures, they abet actions to perpetuate the malady. The case of ultra mega power projects [UMPP] vividly illustrates this. Tata Power Ltd [TPL] and Adani Power Ltd [APL] had bagged such projects 4000 MW and 4620 MW respectively under tariff-based competitive bidding [TBCB] to supply power at fixed tariff all through project’s operational life. The tariff in case of Tata was Rs...
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Energy sector reforms – face political hurdle

The government’s premier think-tank Niti [National Institute for Transforming India] Aayog has firmed up the National Energy Policy [NEP] and the first draft will soon be made public. An overarching objective of NEP is to bring about comprehensive energy sector reforms that could free up sectors such as coal, electricity and fertilizers of subsidies and price controls and help produce more power and make generation projects commercially viable for private companies. It lays out a clear roadmap for lowering subsidies on fertilizers and power by aligning their prices to the market. The policy also seeks to improve the financial condition of power distribution companies [PDCs], which are presently bogged down by huge debt to make the sector profitable – in...
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DOLES TO ELECTRICITY BOARDS DAMAGING

States must bring an end to ‘competitive populism’ and discipline loss-making power boards. They should check their monopoly over power distribution The Union Government has set up a committee to look into restructuring tariff to reduce the burden on industrial units, by making domestic and commercial consumers of electricity pay more (most States categorise those consuming more than 800 units a month as large domestic consumers). The committee will work on classifying consumers in two to three categories and sub-categories to bring transparency in power billing. What is the trigger? At the outset, it is important to know as to (i) why industrial consumers are currently paying more, and (ii) what is the justification for seeking reduction in tariff applicable...
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