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Set for a summer of discontent

V. Jayanth

Several States are faced with a mismatch between electricity supply and demand.

MAHARASHTRA, FOR long the most favoured investment destination in the country, faces a huge power crisis. Except perhaps Mumbai, the rest of the State seems to be reeling under one of the worst electricity supply shortages in recent times. The western region, which the Centre wants to develop into an international financial centre, faces a more than 15 per cent shortage in supply. But it is not the only region to face such a situation. A serious supply deficit looms for several other States — from the National Capital Territory to Tamil Nadu, to Andhra Pradesh and Karnataka.

In most of rural India, power cuts or unannounced load shedding has become the order of the day. For anywhere from four to 12 hours, rural households, consumers, and farmers have had no power in the past couple of months. As summer peaks and the demand for electricity zooms up, the crisis could deepen across the country.

The Dabhol project, launched in 2001, was expected to solve most of Maharashtra's power problems. But the much-touted project collapsed after its promoters — Enron Corporation — ran into problems in the State, and ultimately declared bankruptcy. After years of review and negotiations, a new consortium consisting of the Gas Authority of India Limited, the National Thermal Power Corporation, and a clutch of financial institutions, became stakeholders in a revived project. This was supposed to go on stream in the first phase from May 1, 2007, but that seems unlikely. The gas pipeline remains to be laid along a huge stretch, where problems in acquiring land have cropped up. Further, Gujarat has made an issue of providing subsidised gas from its jurisdiction to Maharashtra, making gas costlier in that State.

Chief Minister Vilasrao Deshmukh has said that all the State's power problems will be solved by 2010. But that is still three years away and the demand could still outstrip the supply. Development analysts say the current pace of industrialisation and economic growth has thrown the infrastructure sector into disarray — it has not kept pace. So much so, power has emerged as the Achilles heel in the growth story of the Indian economy.

Major challenge

For a country that depends largely on thermal power, the gestation period for new projects poses a major challenge. Some States — notably Maharashtra and Andhra Pradesh — have offered to buy power from any source at even Rs.7 a unit, when compared to the average cost of Rs.2.50 to Rs.3 a unit with which they could generate power from their stations. Unfortunately for them, sources have dried up. One problem could be that not many States have invested enough in power generation to keep pace with demand growth.

In the present scenario, where the role of a State has been restricted to that of a promoter or facilitator, rather than being an active player or investor, all that investors expect from Governments is infrastructure — roads, communications, transport, connectivity, and power to name only a few. Today, it is the easy availability of power, human resources, skilled labour, air and road connectivity, and mass transport systems in cities and towns that attract investors. State Governments and SEBs try their best to keep the power cuts and load shedding to the rural areas, to keep the industries, investors, trade, and the vocal urban middle class happy. But during the summer, many States may be forced to extend the period of power shutdowns and load shedding to the urban centres for at least a few hours every day to manage the demand-supply system.

Centre blamed

State officials and Electricity Boards complain that the Centre has let them down in providing the correct linkages. Enough coal has not been always available; transport of coal has always posed problems; promises of alternate fuels such as natural gas have not been met — Andhra Pradesh being a clear example — and the national transmission grid is just getting into place to provide power from the surplus to the deficit zones.

Union Energy Ministry sources make it clear that the States were warned of the impending crisis months ago. "It was up to them to tie up the supply and get into barter arrangements with which they are familiar. Apparently, they got into the act too late and just could not get the supply. As for the supply of natural gas, there is a problem and the Centre is addressing it. Pipelines have become a major issue and we are learning from experience," explains a senior official at the Centre.

He thinks the way forward is for States to step up power generation, unbundle their electricity utilities, effectively contain transmission and distribution losses (or thefts), improve the financial health of the SEBs, and push up the plant load factor of thermal stations with imported coal if needed to shore up the stocks.

For the consumers, it could be a summer of discontent. Power board officials in most States are making no secret of the bad situation they are in, apparently in a bid to prepare the consumers for a couple of months of power cuts, load shedding or whatever it can be called.

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