Massive drive for capacity addition in power essential
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Emphasis on increasing the share of LNG-based generation and atomic energy
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— FILE PHOTO
IN DIRE NEED: A view of the 1,200 MW power project of Rosa Power Supply Company, a subsidiary of Reliance Power, at Rosa village, Shahjahanpur district in Uttar Pradesh.
The annual Economic Outlook, prepared by the Prime Minister’s Economic Advisory Council (EAC), has rightly highlighted the problem of shortage of electricity. At least for the last ten years, the shortage during peak hours has been well above ten per cent. The energy shortage which was hovering around ten per cent two years ago exceeded 11 per cent last year. In the first half (April-September) of the current year, the peak shortage was 12.4 per cent.
In its report, the EAC, headed by C. Rangarajan, has underscored how the problem ultimately affected competitiveness of the industry. Though the industry relies on captive power in the light of perennial shortage problem, this option pushes up the capital cost of factories and, for that matter, even of commercial building spaces.
It is against this backdrop that a massive drive for capacity addition becomes essential. But, the country’s track record has been below par. Even during the XI Plan (2007-12), the achievement can hardly be described as satisfactory. Against the targets of 12,039 MW and 7,530 MW for 2007-08 and 2008-09, the country added 9,263 MW and 3,453 MW respectively. While the target for the current year is 14,507 MW, the achievement was 4,673 MW (as on September 30, 2009).
Considerable slippage
Going by the performance in the early phase of the current Plan period, experts have come to the conclusion that the target of 78,700 MW will not be met. In fact, even in March this year, the then Union Planning Commission member Kirit S. Parikh went on record, saying that “40,000 MW is certainly achievable; 60,000 MW is a possible target (but) 78,000 MW looks a bit difficult.” More or less, the same opinion has been expressed by the Council, which has noted that “there has been considerable slippage and it is expected that even under optimistic conditions, perhaps 70,000 MW would actually be completed during the Plan period.”
Experts cite a host of reasons for the delay in execution. Delay in placement of orders, mainly civil works and BOP (balance of plant) work, and non-sequential supply of material for main plant and BOPs are among the reasons. Shortage of fuel for atomic stations and gas-based plants, inadequate strength of skilled manpower for erection and commissioning, contractual disputes, inadequate deployment of construction machinery, delay in land acquisition and creation of infrastructure also contribute to the delay.
Centre’s intervention
The EAC has gone further, saying that “we cannot afford slippages to persist in future years. Given the centrality of electricity and the lead time needed for both plant execution and finalising fuel linkages and production, we must have a longer time horizon of 15 years. In other words, we must have an ‘active’ as opposed to an ‘indicative’ plan for creating power capacity over the next 15 years.”
Urging the government, both at the Centre and in the States, for greater intervention in capacity creation and other supportive components of the power sector, the Council has made it amply clear that without the government intervention, necessary improvements in the sector will not be possible and that they are crucial to the economy.
Having diagnosed and analysed the problem, the Council has given advice to the authorities in two areas — give further encouragement to the private sector in electricity business and diversify fuel sources.
Calling for more private investment in power generation, the EAC has mentioned that most of the private sector projects are being or due to be completed in or before time and the sector’s contribution to capacity addition in the XI Plan period is likely to be in excess of what had been planned.
According to the documents of the Union Power Ministry and Central Electricity Authority (CEA), private sector’s contribution to capacity addition [in terms of commissioning of units] was 750 MW (target: 750 MW) in 2007-08 and 882.5 MW (2761 MW) last year.
Till the end of September this year, the private sector added 2,899 MW against the target of 6,164 MW for the whole of 2009-10. All its contribution was through thermal power projects. In the Plan period, the private sector is supposed to achieve capacity addition of 15,043 MW, around 19 per cent of the total target figure.
Another aspect touched by the Council is the fuel source diversification. Conscious of the fact that thermal accounts for nearly three-fourths of the total capacity addition target for the current Plan period, the EAC has emphasised the need for increasing the share of liquefied natural gas (LNG)-based generation capacity and atomic energy. Calling for an aggregative approach in nuclear power capacity creation, the Council has recommended that necessary legislative changes will have to be made to allow the entry of private companies in atomic energy. An ambitious programme has to be drawn up for generating 1,50,000 MW over the next 15 years through the nuclear power sector.
T. RAMAKRISHNAN
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