Amid the celebrations of 3 years of Modi Govt., one common convention that has emerged about this govt is that it is a ‘powerful’ govt. It is indeed so. Though i am talking here in a completely different perspective. It is seen that with such an influential n workaholic PM at helm as Modi, ministers usually find it hard to have a distinguished mark of their own in policy making and it’s execution. We must credit three to four ministers of this govt for overcoming this notion. Shushma Swaraj, Nitin Gadkari, Gen.(Rtd) V K Singh and Piyush Goel are some fine ministers this govt has got. This govt may have scored remarkable achievements in many areas but to me the most phenomenal and undeniable transformation it has brought, is in power sector. It is so- partly because, being a power engg I could get a ‘firsthand experience’ of this change, and partly because i clearly understand direct impact of power sector on overall growth of economy. If roads are gateways of development, electricity is conducting channel of growth.
The most talked achievement (and perhaps genuinely so) by power ministry is incomparable rapid electrification of villages. Total 18000 villages were tasked to get electrified, out of it 2/3rd of it is already done in less than half of the estimated time. With the transparency and accountability this mega exercise was done and still being done is another story of excellence. You can lively track progress of work in your village through an online portal and can register your complain upon finding a discrepancy of any sort- which are efficiently addressed in time bound manner.
However the transformations this government has induced in power sector are much deeper in nature, bigger in design and cascading in it’s impact. Unfortunately these aspects of reforms has been lesser talked, acknowledged and recognized as compared to their true significance.
How dim the situation was ???
Before going ahead let’s have a look how our power sector was performing till some years ago. Power industry in our country had got trapped in a negative cycle. Low average demand causing low power generation resulting in an up in cost of electricity prompting to a further lower demand for electricity. There were many factors behind this situation. Structural issues like low average demand and high maximum demand, supply-chain side problems like erratic supply of coal to power stations, distribution side bottlenecks like lack of infra etc. Huge loss incurring distribution companies (DISCOMs) owing to reasons like unsustainable revenue model, immense power theft and irregular & so unreliable payment pattern by end customer, were on the blink of bankruptcy- to add to the misery. These all had made the situation so grave that according to some experts power industry was all set to be second biggest defaulter to banks after steel sector. If it would happen then clearly our banking system would not have survived with two of major core industries defaulting loans altogether.
A close look to the problems being faced by the industry will reveal that most of our suffering is due to distribution side bottlenecks. However the newly installed govt. decided to break the negative cycle power industry had got trapped within, from generation side. They had two reasons to do so. First, generation side issues were comparably lesser severe and second, they completely fall to the authority and ambit of central govt unlike distribution side challenges where different states were also stakeholders and in fact they had a larger role to play. Here (Generation side) they could quickly take decisions and efficiently execute them due to single hand authority. It seems that govt was clear about the solutions right from the start. As Ministry of Coal and Ministry of Power was wisely clubbed together. This was an important development as more than 60% of our total installed power capacity comes from coal based thermal power plants. Further an able administrator like Piyush Goel was placed to the chair of the minister for the clubbed ministry. It greatly enhanced the co-ordination between coal and power companies which were mostly state owned.
With such organised efforts soon coal silos of power plants began to be filled to full capacity. Boilers were full with steam and turbines were in full of action leading to efficient harnessing of total installed power generation capacity of country. Load factor (ratio of current power generation to total installed power generation capacity) of power plants has improvised from 40-45% to 65-75% resulting to a remarkable reduction in cost of electricity per unit. This reduced cost has stimulated overall demand. This reduced cost has also helped many other industries in being competitive by lowering their electricity bill. India’s total power generation has gone up to 145 GW (a straight 15% jump) while total demand has also been on rise side at around 139 GW (almost an increase of 22%). Clearly we have moved from being a ‘power-deficit state’ to a ‘power-surplus state’. And today with our surplus electricity we are selling electricity to Bhutan, Nepal, Myanmaar, Bangladesh and even Pakistan after fulfilling our domestic demand.
An unprecedented rapid addition of renewable energy to national grid is another chapter of this story. To sum the glory of this part- targets supposed to achieve till 2020, has already been accomplished. In a country where deadlines are missed every another day, this accomplishment itself speaks of the level of commitment and efficiency of execution behind.
Efforts are not only made in regard to efficiently harnessing the generation capacity, but also on level of efficient use of electricity at consumer end. For this industrial customers have been compelled to use energy efficient machines at their premises, while on another hand use of LED based bulbs are being popularized at mass level which consumes as less as 1/5th of electricity for same level of brightness than a normal bulb. Another breakthrough achievement in this regard is that this govt could get succeeded in busting the cartel of LED making companies and thus lowering it’s price at reasonable level and within reach of everyone. Today one may find a LED bulb hanging over ceiling even in remotest part of country. This drive to replace normal bulb with LED bulbs have so far saved 9000 million unit, an equivalent of Rs 5600 cr saving annually. In terms of environment protection it has resulted a cut of 80 million ton of CO2 emmission annually. Number itself speaks of the deep and multidimensional impact of the drive.
Challenges yet to be finished:
In spite of phenomenal positive changes power industry is going through, for a common man it’s impact on his life is yet to be realized. Though being a power-surplus country, many parts of land are still bearing hours of power cuts. A large no. of people are still continuing in dark for hours despite of glooming power generation because of distribution side hurdles. The problem in distribution side is multi-faced. We will have a quick overview of them.
1. Infrastructure: Distribution infrastructure in our country is not only insufficient but old and outdated too. Insufficient infra leads to congestion in power flow resulting in frequent disruptions or load shedding specially in peak hours. Even an hour of rainstorm registers a power disturbance in days due to shabby infra. Similarly outdated protection schemes in power circuit specially at lower voltage levels results in isolation of bigger section of power circuit during a fault forcing thousands of people living in dark. Clearly we need a revised distribution infrastructure capable of catering mammoth load of today and future too. According to an estimate India needs at least 2 lakh crore of investment in this regard.
2. DISCOMs (Popular name for Power Distribution Companies): Discoms themselves are biggest problem responsible for plight of distribution sector. Primarily it is their exorbitant bad economic performance responsible for all further problems. Inefficiency and corruption are some other players. Even infrastructure issues discussed above have their origin here only. Discoms have been consistently so economically stressed that they could hardly find a margin enough to take care of infrastructure. A couple of things are responsible for making these companies a “model of fail”. They are mostly government run at state level. Politics of power often overwrites economics of electricity. They are often compelled to keep their rate of electricity lower than cost due to short term political gains. No matter how much monopolistic market you are playing in, if you are charging below than your cost you are bound to fail. Same holds true for Discoms. In spite of operating in monopolistic busines their economic model is not sustainable. Another poor aspect of their revenue model is that these companies are not only selling below their cost but they have also failed in recovering that much money from their customers. This is accentuating the crisis. Today most of our discoms are on blink of bankruptcy, running through government grants and loans. As Generation and transmission companies also ultimately rely on these discoms for recovery of their cost, these discoms are dragging even those corporations too towards insolvency.
3. Low average demand and High peak demand: It is a structural issue power industry have been facing in our country from starting. Insufficient electrification & low level of industrialization are two key reasons behind it. Such situation not only increases cost of electricity but also negatively affects it’s availability at the time of most urgency- making the whole exercise of power generation, transmission and distribution meaningless. Because utility of power lies not only in just being available but in being reliably available.
4. Power theft: Total T&D losses (Transmission & Distribution losses) in India is among the highest in world. It’s not like that our machines are of poor grade. They are mostly at par with the rest of world. Technically T&D losses can not be more than 7-8%. If it is incurring more than it is a simple case of power theft. In India T&D losses are around 22%. It means around 1/7th (~15%) of generated electricity is being stolen. It also translates that an genuine customer is paying a 15% surcharge on his electricity bill. Similarly it means electricity companies have an immediate scope of increasing their margin by 15%. A huge resource addition to their stressed balance sheets.
The best thing about all above listed problems is that they are well recognized ones. Problems are severe and complex but not impossible to attend. The new govt. has enthusiastically taken up the issues with utmost sincerity. However the pace of progress has not been that much great. State governments are in a greater role here. Lack of political willingness is a big hurdle. Political grudging makes things even worse. But Government is committed to do as much as possible. Lack of infra is strongly linked with poor economic health of discoms. So govt has decided to take up economic stature of these discoms. Most of our discoms are badly debt ridden. Central government has come with an unique, inclusive and unprecedented debt restructuring program- The UDAY (Ujjwal Discom Assurance Yojana) bond scheme. It is aimed at bringing ailing power distribution companies (discoms) to a state of operational efficiency, with state governments taking over up to 75% of their respective discoms’ debt and issuing sovereign bonds to pay back the lenders. UDAY envisages a permanent resolution of past as well as potential future issues of the sector The scheme seeks to achieve this through several simultaneous steps including reducing the interest burden on the discoms by allowing the states to take over the bulk of their debt, reducing the cost of power, and increasing the operational efficiency of the discoms by providing capital and infrastructure like coal linkages. Starting from four states now total 22 states has come with this scheme. Fortunately this scheme seems to serve it’s purpose. Balance sheet of these companies are coming back to shape and many financial institutions are now willing to give them long term loan- an indication of increased faith in these companies by market. Similarly issue of low average demand is being tackled by rapid rural electrification. GoI has publicly committed to bring T&D losses this year to at least 15% from current 22%.
Slowly but steadily we are marching towards our goal. Hopefully soon these immense efforts will hit life of a common man and will fill his life literally with light and power. India’s aspiration to be a future power can not be realized without paving ways to empower it’s power sector. With the current pace it is certainly not too far. Ewamastu !!
- Abhinav Shankar