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Challenges of Mitigating Power Shortage, Shri R V Shahi, Former Secretary, Ministry of Power

India Energy Forum organised its Twelfth Annual Event "India Power Forum at Delhi on 28th October, 2009. The Conference was inaugurated by Union Power Minister, Shri Sushil Kumar Shinde. Prior to his Inaugural Address a number of issues had been brought out by other Speakers including Mr. Bami, the President of India Energy Forum, Shri Brahma, Power Secretary, and myself. Mr. Bami highlighted the issues which might prove, for future ambitious programmes of capacity additions, to be constraints. Particular emphasis was given by him on issues such as acquisition of land, which in the recent past, has emerged as a major problem area, availability of fuels, clearances of projects for environment and forest and domestic capability on manufacturing of power plant equipment. I had the opportunity of flagging, for consideration and action by the Ministry of Power, the following few issues:

  1. In the last three to four years, Ministry of Power has particularly emphasised that one BHEL with its limited capacity, even after its expansion, would be unable to cope with the massive expansion programmes of Indian power industry. Particularly the Minister of Power brought this issue, in a very significant way, at the centre of discussion, and advocated that we needed to have a number of factories to produce boiler, turbine and generator. This has led to atleast four joint venture companies seriously pursuing development of such factories. What is needed is to put in place a mechanism, may be with Central Electricity Authority or any other agency, to periodically monitor the progress of these factories. Experience indicates that BHEL made expansion plans in 2004, based on serious pressure and follow-up by the Ministry of Power, to expand to about 10,000 MW per year from their then existing capacity of about 4,000 MW per year. These plans indicated that by the end of 2006, these expansion would be completed. However, since BHEL took their time to place orders for plant and machinery, their programme got delayed by almost two years, inspite of follow-up from time to time. The suggestion is to institutionalise a mechanism jointly by the Ministry of Power and the Ministry of Heavy Industry, so that future expansions of BHEL as also of the other four or five Companies, which have started developing the factories, meet the schedules and make available to Indian power industry the required equipment as per the promises they make.

  2. Balance of Plants, experiences have shown in last four to five years, have given even more uneasy moments while commissioning various projects. Preparedness on the part of suppliers of BOP both in terms of manufacturing and despatch as per schedules, and also in terms of constructing and commissioning these systems, when delivered, have posed to be major hurdles. There is a need to interact with industry bodies to inspire them to set up factories covering balance of plant systems for power plant with required quality standards. Equally important is the urgent need for such agencies to develop construction and commissioning capability. What is important for the entire manufacturing sector - main plant as well as balance of plant - to understand and recognise that it is not enough to produce plant and machinery, it is equally important that they either create in-house capability or encourage and facilitate creation of good out-sourcing agencies, so that once manufactured and supplied there is no gap in construction and commissioning.

  3. The entire blame for inadequate number of manufacturing organisations and also the commensurate construction and commissioning outfits cannot be placed only on the manufacturing sector. To be fair, a good part of the blame also belongs to power generating companies, particularly the leading ones, which have been somewhat harsh on formulating the qualifying requirements for considering such new initiatives. They need to recognise and appreciate that no new factory or any construction and commissioning outfit can have prior experience and that too of two to three years. If they have, they would not be new, and if they don't they would not be considered. This creates a riddle difficult to resolve. The worst consequence of this flawed approach has obviously to fall on none other than power sector itself. Wisdom, therefore, lies in power generating utilities, particularly leading companies like NTPC, to formulate workable and practical strategy which can lead to development of a number of manufacturing, construction, erection and commissioning organisations, so that in the new orbit of ambitious expansion of power sector, the problem of equipment supply and their commissioning becomes the matter of the past.

  4. Short of restructuring and reform in the coal industry, which is so vitally linked to the growth of power sector, and whose restructuring has been as necessary as it has been for the power sector, the liberalisation of captive coal blocks, which was initiated in 2005, has no doubt, been a remarkable initiative. Based on this Policy orientation, a large number of power project developers have been allotted coal blocks. However, progress on coal mine development in these blocks has been rather slow. Some of the reasons do belong to power project developers. But, a number of reasons belong to the coal industry in the public sector and the Coal Ministry. Obviously, these captive mines developers cannot be expected to create, in large coal bearing areas, Master Plans, common infrastructure such as road networks, railway lines etc. which would be needed by all these mines developers. Also, availability of reliable Geological Reports from the Coal Mines Planning and Development Institute (CMPDI), a subsidiary of Coal India, and land acquisition for which there is a separate legislation, have been some of the important issues standing in the way of smooth progress. Allotment of blocks has been a commendable beginning. But, we may not get coal, atleast as per the required schedules, for the projects which are being developed, if these issues are not addressed by and among the Ministries of Power, Coal and Railways. Quite apart from captive coal blocks, development of coal mines by the public sector coal companies, to match the schedules of power project commissioning, is also a matter of serious concern.

  5. Post Electricity Act 2003, and several other policy initiatives taken in last few years, response of private sector as also growth plans of public sector companies have been highly satisfying, so much so that more than 80,000 MW of projects are under construction. Chinese manufacturing companies have taken keen interest. At present projects aggregating to about 21,000 MW are under construction and a large number of Chinese Engineers and Technicians are engaged in these construction and commissioning activities. The recent decision of the Government that all the foreign personnel need to go back by 31st October, 2009 (earlier this date was 30th September, 2009), has put a question mark on the construction progress in these projects. 21,000 MW is not a small number. This type of a decision would have serious adverse consequences and, therefore, this issue needs urgent attention and remedy.

Shri H.S. Brahma, Secretary, Ministry of Power, responded to the two major issues concerning the doubt about availability of coal and the problems concerning issue of VISA to Chinese personnel. It was assure that these issues would definitely be attended to by the Ministry. Besides, he advised the private sector that responsible and capable EPC agencies should come up, so that the ambitious capacity addition programmes are adequately and suitably handled by such agencies. He expressed concerned that in North-Eastern region, a large number of private developers have got a number of hydroelectric projects allotted to them, but most of them are not pursuing these projects seriously. Development of hydro projects is necessary not only to address our power problems and take care of climate change issues, but also it is essential for the development of North-Eastern region. Efforts of private sector companies need to be intensified.

Shri Sushil Kumar Shinde, Hon'ble Minister of Power, addressed the Conference and extensively covered a large number of issues which are given below:

  1. "The Theme of this year's Conference "Challenges of Mitigating Power Shortage" is indeed very aptly chosen. Until the time, every household in India is provided adequate electricity, industry gets uninterrupted and reliable power supply, agriculture does not suffer for want of electricity and our children do not get disturbed in their studies for lack of electricity supply, power shortage will continue to be a great challenge for us. Equally strong is, and will continue to be, our determination to ensure that "Power for All", the promise that we have taken, is made a reality.

  2. It is with this Vision and Mission, that our Ministry is making all possible efforts to meet the challenges and see that adequate electricity is generated, that reliable transmission systems are put in place, that customer friendly distribution practices are established and that efficient consumption of electricity becomes a norm and a habit. All our legislative and Policy initiatives, which we have taken in last few years, aim at achieving the above objectives. If you just focus at the initiatives and actions, launched in last five years or so, you would recognise that architecture of electricity sector has not only been overhauled - a process that still continues - but also customers have become the central point of all our efforts and activities.

  3. The speed, with which we are able to capture the needs for changes and reforms, could be assessed by the series of Policy changes that have been taking place. Only recently, we have revised the Policy on Mega Project benefits responding to the desire of the industry to make it more practical and workable. The new definitions of Commissioning of power plants will, I am sure, inspire our power plant personnel to construct and commission the new power units with desired seriousness. And, this would ensure that when a Unit is commissioned, it really delivers electricity at almost its capacity. Obviously, you would all agree, we should not be encouraging ceremonial commissioning.

  4. I am happy to suggest that within two and half years of the current Five Year Plan, we have been able to commission about 18,500 MW, as compared to almost similar numbers done, in the past, during the entire Plan period. We could have definitely done even more if only the power plant equipment manufacturers - both main plant and balance of plant - had been somewhat better prepared to manufacture, despatch, erect and commission.

  5. We had the first meeting of the Power Advisory Group, which has been constituted under my Chairmanship, on 25th September, 2009. We analysed, in detail, the possibilities of capacity addition during the current Five Year Plan. As you are indeed aware, power projects have long gestation periods - ranging between four to six years. Therefore, what you plan in one Plan period, you get them in the next Plan period. Fortunately our preparations on the new projects - Central Public Sector, State Sector and Private Sector - in last four to five years, have been such that more than 80,000 MW of projects have been in implementation during this Plan. We had targeted 78,000 MW for this Plan. We could achieve this provided the equipment suppliers could fulfill their commitments on schedules. The Reviews indicate that even with the problems with respect to these Agencies, there is a high degree of certainty that we could still achieve more than 62,000 MW. This will be almost three times of what we have achieved in any one Plan period.

  6. Quite often, a point is made in various discussions, as also in Press and Media, that if China could achieve almost 70,000 MW per year of capacity addition why India cannot do so. This is a valid concern. While India has its own systems of dealing with various issues of sanctions and clearances, including environmental approvals, which are quite different from China, yet, the biggest difference is that China has been able to create a power plant equipment manufacturing capacity of the order of over 70,000 MW per year, as compared to less than 10,000 MW that we have in India. In fact, the capacity of BHEL, just two years back, was only about 5,000 MW per year.

  7. We raised this issue - rather loudly and strongly - that this is the biggest hurdle in our ambitious expansion programmes. It took sometime for these concerns to fructify into definite actions. Today, there are atleast four Agencies, other than BHEL, which are seriously pursuing the power plant equipment manufacturing business. We expect that in five years time the total manufacturing capacity would rise to over 25,000 MW per year.

  8. Power Grid Corporation of India has, no doubt, been doing an extremely important job and has been undertaking the responsibilities of transmission for public as well as private sector projects. But, this organisation alone obviously cannot cope with the total requirement. The recent initiatives of the Government include private sector transmission projects to be developed on competitive basis, just as Ultra Mega Projects are being developed through Competitive Bids. In a few years time, we do expect substantial transmission capacity also through private sector route.

  9. Our commitments and efforts .are, no doubt, directed towards increasing the power generation capacity and commensurate transmission systems, so that power shortages are minimised. Yet, we are equally concerned about reforms in the distribution sector, and challenges in the field of rural electrification. The restructured APDRP, based on the experiences of Tenth Plan, is being implemented and monitored in a manner that the targets in the urban area distribution should definitely be achieved. Similarly, under Rajiv Gandhi Grameen Vidyutikaran Yojna, we are confident that during the current Five Year Plan, the challenge of electricity access in rural India should be behind us. Of course, another challenge to provide adequate electricity will remain for all of us to tackle. The recent initiative, under this Scheme, on Decentralised Distributed Generation, by the REC, would definitely lead to a meaningful contribution towards mitigating power shortages in rural India.

  10. I have said this in the past. And, I will like to reiterate. We have shortage of power. But, we also use electricity in inefficient fashion. If only we consumed electricity efficiently, we could save almost 20%. In last few years, we have taken several initiatives through Bureau of Energy Efficiency. We need committed co-operation of all sections of society - Manufacturing, Agriculture, Offices, Shops, Malls and Households - not only to be aware of the need and methods of energy conservation, but also to effectively act on these. This makes economic sense for them. But, more importantly it is a national need. "

In the concluding Session, which was addressed by Shri Bharatsinh Solanki, Minister of State for Power, I had the task of summarising the conclusions and suggestions of the one day Conference. It deliberated, in two important Plenary Sessions viz. "Meeting the Eleventh Plan Targets - Issues and Possible Solutions" and "Financing, Transmission, Trading, Open Access and Merchant Plants" on various relevant issues. Besides a number of points already made, I would only outline a few important points highlighted in this Session:

  1. Though construction is in full swing on 80,000 MW projects meant for Eleventh Plan, including the projects which have already been commissioned, there is a high degree of certainty that about 62,000 MW will be commissioned.

  2. Private sector role has been increasing and in the Twelfth Plan it could be as high as 50% of the capacity addition, which is a very healthy sign.

  3. There is definitely a need for coordinating the captive coal mine development by public and private sector companies and a need for development of common infrastructure in an institutionalised manner. Resolution of other common problems of various captive mine developers also needs urgent attention.

  4. The issue of VISA for Chinese Engineers and Technicians needs immediate resolution.

  5. Ministry of Power may set up a mechanism whereby the expansions of manufacturing capacities (Main Plant and Balance of Plant) are monitored closely and effectively.

  6. Availability of coal is bound to emerge as highly critical. Development of coal mines by coal companies, by captive mine developers and import of required amount of coal together with acquisition of coal mines abroad, will all need to be appropriately co-ordinated and monitored by the Ministry of Coal with the assistance of Power Ministry.

  7. Massive Capacity Development Programme requires huge financial resource, both by way of equity as well as through loans. The present cappings, for the purpose of lending, for the business group as well as for the sector, need to be suitably enhanced. Considering the limited number of business groups which have entered and are entering the power sector, the existing group capping is proving to be inadequate. The sectoral capping has all the justification to be increased because, if we exclude railways, 50% of the total fund requirement for infrastructure, is required by the power sector.

  8. Open Access in distribution is being resisted in a few States by wrongly interpreting Section 11 of the Electricity Act 2003. In this regard, the Union Power Minister, Shri Shinde, made a very welcome declaration in the Inaugural Session itself that the legal provisions are quite clear, that practices adopted by a few States, using this emergency provision, to prevent Open Access, is not in accordance with Law. However, if States continued in this manner, Ministry of Power may even bring an amendment to the Act, if required.

  9. Merchant plants are coming up. They will definitely facilitate electricity market development. Required cushion in transmission capacities, which are of the order of 30% additional as suggested by CEA, would go a long way in promoting transactions through merchant plants. Completion of these transmission systems in time would be essential and hence they need close monitoring.

  10. Power Finance Corporation and Rural Electrification Corporation could also provide, in their portfolios, a reasonable proportion for funding equity and supporting such promoters as may need such equity assistance. Other finance Companies and Banks may also be approached for similar dispensation.

Thus, this one day Annual Event of the India Energy Forum did succeed in bringing out important critical issues. Resolution of these could definitely enhance the possibility of meeting the targets and in preparing the sector for even higher targets in Twelfth and future Five Year Plans.