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Grim power scenario in many States

Problems are known, no political will to resolve them; A.P., Karnataka and T.N are desperate to buy power to meet peak demand

— Photo: Sandeep Saxena

CRUCIAL HYDEL POWER: A view of the 300 MW Chamera-II project on the river Ravi in Chamba, Himachal Pradesh, which was commissioned in record time.

THE ANNUAL Economic Survey has painted a grim picture of the power sector as it stands at the end of the X Plan. Not only has the target for additional power generation and capacity installation been missed in two successive five-year plans, but also the losses incurred by the State power utilities have risen in 2006-07.

There appears to be very little that the Central Government can do to ensure that the State governments fall in line with the provisions of the Electricity Act and start implementing reforms in the power sector in letter and spirit.

The Centre has tried to offer some carrots to the erring States, by putting on the table a memorandum of understanding to implement power sector reforms.

A significant share of the cost of effecting these reforms can be met by the Centre, under the MoU. Further, Finance Minister P. Chidambaram, in his current budget, has stepped up the allocation under the Accelerated Power Development and Reforms Project (APDRP) in a bid to reduce the Aggregate Technical and Commercial (ATC) losses.

Maharashtra seems to be in deep trouble in the power sector. Andhra Pradesh, Karnataka and Tamil Nadu are trying every possible means to buy additional power to meet the projected peak demand during the summer months. Some of these electricity boards may be prepared to buy power at over Rs. 6 per unit, compared to an average cost of generation of between Rs. 2 and Rs. 2.50 per unit on their own.

Because of such purchases, the subsidies incurred in power supply, and above all the ATC or the transmission and distribution losses that the State utilities incur, the total losses sustained by the State electricity boards for 2006-07 have climbed up to Rs. 26,000 crore.

Gas-based plants hit

Power generation in many States seems to have been hampered for various reasons. Coal linkages and availability remains a problem that the State utilities are battling with, though the Union coal and power ministries appear to be addressing this major issue.

Most gas-based power plants, especially in a State like Andhra Pradesh, have not been able to generate electricity this year on account of the fuel crunch. Higher prices of liquid fuels too contributed to the mounting losses. The Survey estimates the generation loss from April to October 2006 due to gas supply shortages at 18.43 million units. To meet their requirements of coal, the State utilities may be importing about 7.4 million tonnes this fiscal.

In terms of fiscal and financial management, gross subsidies increased by over 10 per cent during the current year, peaking at Rs. 40,131 crore. Consequently, the rate of return of the State utilities plunged further to a negative of 27.4 per cent from an earlier negative rate of 24.8 per cent in the previous year. In this, the commercial losses alone accounted for Rs. 26,150 crore, up from Rs. 21,110 crore in 2005-06.

The Survey points out: "Unless effective steps are taken to slash transmission and distribution losses from 40 per cent to 15 per cent, the electricity situation will not improve.''

Poor capacity addition

India has an installed power capacity of 1,28,432 MW, of which 55.4 per cent comes from the States (71,250 MW), 33.7 per cent from the Central sector undertakings and just 10.9 per cent from the private sector.

There were ambitious plans to add 40,000 MW capacity in the IX Plan, and again41,110 MW during the X Plan. While the capacity addition in the previous plan was just about 50 per cent, it would be a net addition of about 23,250 MW during the current plan period, a shortfall of 43 per cent.

Central schemes

With more States looking to the Central sector undertakings for power supply, the Centre and its power corporations have launched a variety of schemes.

The latest approach seems to be the Ultra Mega Power Projects, two of which have been awarded already and two more may be tied up by July.

A substantial increase in generation capacity, targeting of subsidies, unbundling of the power utilities and a drastic cutting down of distribution and transmission losses may be the only means to stabilise the State power agencies and meet the power needs of a growing economy and its people.

V. JAYANTH

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