To fix the crumbling power generation and distribution systems, the Modi regime has to crack down on the political class that promises free or cheap electricity. All other steps, such as amending the Electricity Act, are just cosmetic
Inaugurating the first Renewable Energy Global Investors Meet & Expo (RE-Invest), Prime Minister Narendra Modi wondered how political parties could promise to supply electricity at reduced rates when their States are dependent on electricity supply from outside.
The remark was targeted at the Aam Aadmi Party which, in its election manifesto, had promised to cut electricity bills by half, even as Delhi gets nearly 70 per cent of its power from other States. In 2015-2016, Delhi’s total power requirement is expected to be over 6,000MW; which means, it will draw about 4,200MW from other States.
However, it will be imprudent to dismiss this as a political statement directed at the AAP alone. Cutting across party lines, Mr Modi was making a much broader point when he opined that “during every election, political parties promise free power” without even ascertaining if they can arrange for the supplies.
What Mr Modi left unsaid was that this strategy of recklessly promising cheap or free power and then proceeding to redeem the promise in an equally brazen manner (showing little regard for available resources) — ingrained in India’s political DNA for generations — has damaged the Government’s ability to deliver requisite supplies on a sustainable basis.
Supply of electricity at subsidised rates (or even for free in some States), combined with huge transmission and distribution losses — a sophisticated nomenclature for theft — is the root cause of the monumental losses suffered by State electricity boards and power distribution companies in almost all the States.
Perennially, faced with a cash crunch, SEBs and PDCs are not able to make timely payments to the power generators , for instance, the National Thermal Power Corporation and other public sector undertakings and also to independent power producers. Considering the criticality of power, under political diktat ordinarily, NTPC and others are forced to continue supply despite non-payment.
This affects their own balance sheets and their ability to undertake investment in capacity expansion and modernisation. The ability of generators to augment capacity and ensure its optimum utilisation (of the total installed capacity of 2,50,000MW, electricity actually delivered is only 1,40,000MW) is also impaired by grossly inadequate fuel supply linkage. Coal India Limited has failed to increase coal production to the desired level. Besides, 25,000MW of gas-based capacity is lying idle or running at very low capacity as supplies from KG-D6 fields have virtually dried up (a meagre 10mmscmd against the committed quantities of 80mmscmd).
So far, Mr Modi has not demonstrated the courage to address this endemic problem head on. How else does one explain the BJP’s own vision document for Delhi promising power subsidy (to say that this will be restricted to those below the poverty line, does not make it any less populist than the AAP) or the Akali Dal in Punjab giving free electricity to farmers in that State?
The BJP was voted to power on the plank of development and good governance. Development, without uninterrupted supply of power for industry, businesses, services and agriculture, is unthinkable. Team Modi had proclaimed the Government’s commitment to give the required boost to the power sector (Mr Piyush Goyal wants to see every household in India without an inverter!) However, this goal will remain a pipe dream as long as the SEBs and the PDCs continue to remain in dire financial straits.
Any amount of financial restructuring or even amendments in the Electricity Act (giving the consumer the right to choose his supplier, therefore fostering competition) will not help extricate the SEBs and the PDCs from their perennial mess, unless the political class stops promising free or subsidised power.
Mr Modi needs to crack the whip now. With global prices of energy including gas declining sharply and domestic coal for power plants also expected to be cheaper (courtesy the successful auction of coal mines, linked to power plants, following ‘reverse bidding’ method), this is the right time to take a call. He should tell the SEBs and the PDCs in all BJP-ruled States to sell power at rates as approved by respective regulatory commissions. This will enthuse other States to follow suit.
Concurrently, steps should be taken to improve efficiency and reduce cost in the generation, transmission and distribution systems to ensure that electricity is delivered to consumers in a cost effective manner. Irregularities in functioning of the three PDCs in Delhi as also in other States, need to be examined and steps taken to remove them.
Mr Modi must catalyse action in these areas as that will deliver fast results in terms of cheaper electricity without support from tax payers’ money. He should give precedence to these measures over amendments in the Electricity Act which may take time to yield the desired outcome. India earnestly waits for some hard play from Mr Modi to end the cult of heavily subsidised or free power.http://www.dailypioneer.com/columnists/oped/disband-the-cult-of-freeloaders.html