Ten out of 28 States have a power deficit of more than 20 per cent.

S. D. Naik

There appears to be no solution in sight for the prolonged and worsening power crisis facing the country with continuing slippages in capacity addition targets, unacceptably high levels of transmission and distribution (T&D) losses, power thefts and rampant corruption.

The growing scarcity, poor quality and high cost of power with frequent outages is an issue of great concern at a time when serious efforts are being made to put the economy back on a higher growth trajectory.

With mounting power deficits, many States are facing a crisis situation. While the overall demand-supply gap averages around 12-14 per cent, 10 out of 28 States have a deficit of more than 20 per cent. The peak level power deficits are much higher.

According to a joint study by Manufacturers’ Association for Information Technology (MAIT) and Emerson Network Power (India), India Inc. lost Rs 43,205 crore during 2008-09 due to high outages of power, both scheduled and non-scheduled.

The study further added that such direct losses had more than doubled since 2003 when these were estimated at Rs 22,000 crore.

The total national losses and the opportunity costs of growing power shortages are colossal as a study by Universal Consulting has shown. It says, the opportunity cost of power shortages in the last financial year has amounted to Rs 2,89,000 crore or a 6 per cent loss in GDP terms.

Another recent study has pointed out that Indians are forced to spend around Rs 30,000 crore every year on inverters and generators because of widespread power shortages and load shedding. Residential and commercial users in India have so far spent about Rs 1 lakh crore on buying invertors and generators; this amount could have helped build new generating capacity of nearly 30,000 MW.

Apart from adding to large-scale pollution and increased consumption of diesel, the cost of electricity produced by generators is much higher. For the helpless consumers, it is a choice between high cost electricity and no electricity.

The deteriorating power supply situation is not only because of the big slippages in capacity addition targets in successive Five Year Plans but also because of whopping T&D losses. While the country’s installed capacity for power generation now is 1,51,073 MW, only about 96,000 MW is available for actual consumption due mostly to these losses and power thefts.

To deal with the widening demand-supply gap, the capacity addition target of the power sector during the Eleventh Plan was fixed at 78,557 MW, almost four times the actual addition during the Tenth Plan. Moreover, in September last year, the Power Minister, Mr Sushilkumar Shinde, had announced the scaling up of this target to 90,000 MW to meet the rising demand for electricity.

Against this backdrop, the Planning Commission’s recent observation should come as a big disappointment. It says a capacity addition of just around 60,000 MW could be possible during the Plan period ending 2011-12. Going by the achievement so far, the experts are sceptical about even this figure given the numerous problems being faced by the sector.

The Minister of State for Power, Mr Bharatsinh Solanki, recently disclosed that the Government is facing a shortfall of Rs 5 lakh crore in financing of capacity addition projects.

The funds flow to the power sector will continue to be constrained as long as power policies refuse to address the distribution and market risks. The problems have been compounded by the failure to bring down the technical and commercial losses of power utilities from the prevailing 35-40 per cent to the mandated level of 15 per cent. Repeated attempts to reform the ailing power sector by the successive governments over the past more than a decade have failed to yield the desired results because of piecemeal approach to reforms, poor governance and implementation and a lack of political will. In particular, the reforms initiated in the distribution sector are in a shambles with about 75 per cent of the technical losses occurring at the distribution stage.

In 2001, the Centre agreed to a one-time write-off of State Electricity Boards’ dues to the tune of Rs 41,473 crore and advised the States to reform the Boards or privatise them, but nothing much happened. The half-hearted attempts by Delhi and Orissa turned out to be failures because of partial implementation and poor follow-up. Many States have outright refused to reform their Boards.

As Mr B. K. Chaturvedi, Member, Planning Commission, says, the States are reluctant to privatise power distribution because “power is a highly political matter in the States”.

Not surprisingly, power utilities have continued to incur huge losses even after the waiver of their dues in 2001. Their losses amounted to Rs 28,824 crore in 2006-07, 25,701 crore in 2007-08 and Rs 26,461 crore in 2008-09.

Because of mounting losses, the SEBs failed to invest in new projects. Hence, way back in 1991, India opened up its power sector to private and foreign investors and close to 200 MoUs were signed with proposed investors to produce over 50,000 MW of power. However, most of these projects failed to take off as the investors realised that it will be binding on them to sell the power to bankrupt SEBs without any guarantees to receive the payments.

With growing anxiety, the Parliamentary Standing Committee on energy has decided to set up panels for the power sector to look into the issues relating to roadblocks in the capacity creation of thermal, hydro and gas-based power projects and recommend measures required to avoid slippages in the procurement of equipment, reduction in aggregate transmission and commercial losses, availability of fuel supply, etc.

What is needed is the political will to implement the much-needed reforms, including the privatisation of the SEBs where necessary and comprehensive reforms in the distribution sector.

Efforts are also needed to reduce excessive reliance on coal-based thermal power plants which currently account for 66 per cent of the total power generation capacity and are starved of coal supplies despite imports. Similarly, the obsession with mega power projects is clearly misplaced since many of these have been bogged down by land acquisition problems. Instead, more number of smaller projects would deliver better results.

What is more important, since power is a concurrent subject, without the active co-operation of the States, it will not be possible to proceed with the much-needed reforms in the sector. For this, the Centre will have to play a leadership role in identifying the problems and tackling them on an emergency basis.

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