Power sector continues to provide
the biggest challenge, as also the opportunities, in the Infrastructure group.
Though there have been substantial shortfalls with reference to the targets in a
number of other infrastructural segments such as highways, rural roads, urban
infrastructure, coal, petroleum and gas, several components of Bharat Nirman,
ports, airports etc., the shortfall in respect of power sector comes into
sharper focus as it leads to shortages which are experienced most closely and
most immediately. Power shortage affects public at large and, at the same time,
adversely impacts manufacturing. Electricity has been rightly recognised as the
lifeline of the economy. The UPA Government, in the previous tenure, inspite of
best intentions, could not do many things, which were essential, primarily
because of the dynamics of political configuration. On many occasions the Left
Group, as also a few other coalition partners, almost vetoed on many of the
Schemes and Programmes which impeded the reform initiatives in a number of areas
of activities including infrastructure. The new UPA Government has a much more
comfortable political structure. Therefore, it can be expected that the
Government may act on all the initiatives which it could not because of the
Power sector challenge emanates
basically from some of the inherent technical difficulties of this sector, but
more importantly it is constrained on account of the sector being mostly under
the control of the State Governments. As a result, inspite of best of
performance and highly satisfying financial results of all the public sector
companies under the Ministry of Power, without exception, the Central Government
invariably gets the major portion of the blame on account of inefficiencies and
major shortfalls in performance of the sector as a whole. Failures of the State
Governments, and their power utilities in a cumulative fashion, get pin-pointed
to the federal Government. However, inspite of this basic limitation, the
Central Government Ministry will be expected to provide the right leadership,
persuade, motivate and, if needed, pressurise the State Governments to perform.
An attempt is being made to briefly outline the important Action Agenda which
the Ministry of Power may consider to take up.
Inter Institutional Group (IIG) of the type that had been set up in the
Ministry of Power in the year 2004, with highly satisfying results, needs to
be reconstituted with the enlarged brief that it would not only facilitate
financial closure in terms of lending but will also address the issues
concerning equity support. This Group should meet on a monthly basis and
discuss with each of the developers their unique problems and evolve
appropriate support, sometimes out of box solutions.
the macro level, to infuse capital into power sector, there should be no
hesitation in diluting the Government holdings in the Central Public Sector
Undertakings viz. NTPC, NHPC, Power Grid, PFC, REC, SJVNL, THDC, NEEPCO etc.
upto 49% in a progressive manner. This alone may fetch, in different
tranches, equity infusion of the order of 150,000 Crores. State Governments
and their generating companies should also be persuaded to follow similar
approach. Instead of State Governments being expected to provide, in the
budgets, equity funding for their generating companies, which has been rare,
it would be preferable that they are asked to access equity capital market.
We may recall that until 2003, even the Central Public Sector Undertakings
of Ministry of Power had not accessed equity market. When they have done so,
the results have been highly rewarding. Similar initiative needs to be
replicated by States all over the country.
Provisions of Electricity Act and Rules relating to captive power plants are
very liberal. This source of capacity addition has already started making
its contribution. Performance on this score can be bettered if, in an
institutionalised manner, the necessary support at the State Government
level, from the regulatory system and from other agencies, is provided to
them. On a periodic basis, if captive plant developers are approached and
their problems ascertained with a view to addressing them, this category can
create capacities for their own use and also for providing excess power to
regular system of monthly review at the level of Secretary Power and
Secretary Environment and Forest for all projects - Thermal, Hydro and for
both Public and Private Sector would go a long way in speedy clearance of
power projects. Such a system, introduced in 2005, did prove effective. Now
since the projects are larger in number, the frequency of such interactions
could be faster.
Almost all hydroelectric projects involve forests and, in many cases,
wildlife. Environment and forest clearance for these projects has become
highly complex. Each case has to go right upto the Supreme Court. This is
because of an earlier direction of the Supreme Court. Ministry of Power and
Ministry of Environment need to take up this issue for a review of the
earlier direction. Also, there is a need to review the present procedure of
each case being examined by the Wildlife Board.
Nepal has a hydro electric potential of more than 83,000 MW (some of the
experts have opined that, if properly assessed, the potentials could be as
high as 200,000 MW). There is a Joint Working Group with representations
from Governments of India and Nepal. However, not much headway has been
possible so far. A high level Task Force may be set up with the
responsibility to plan for 10,000 MW in next 10 years and 20,000 MW in next
15 years, to work on this specific assignment in a focused manner.
Performance of power sector, particularly on capacity addition and power
generation, is greatly dependent on Coal Sector. While radical restructuring
of the power sector has been done - and the process continues - starting
from Electricity Act 2003, coal sector reform process has remained stagnant.
There is an urgent need to revive the Bill which is pending consideration of
the Parliament. Unless coal sector reform takes off, power sector reform and
restructuring would not yield the desired outcome.
Allocations of Captive Coal Blocks for power projects has been the second
best solution. An item which has remained outstanding, however, is the
interpretation of the phrase "Captive". In the Power Ministry, the consensus
has been that so long as the end users are identified, any Special Purpose
Vehicle could develop coal mines. Legal opinion supports this
interpretation. This needs to be further followed-up, so that in the absence
of the Coal Bill not materialising, this interpretation, when implemented,
could more or less meet the requirement.
Implementation of the captive coal block allotments is another issue which
needs close monitoring. There are a number of developers who may have to be
advised to be more serious. Also, there are a number of developers who are
committed and serious but they need right support from Coal Companies and
Coal Ministry. Power Ministry could play a catalytic role to ensure that the
non-serious developers are replaced timely by others and the serious
developers get the required support and assistance.
the year 2008-09, substantial amount of power generation loss was faced
because of coal shortage. Most of these generation losses could have been
avoided if the utilities took timely action for import of coal. In the
future also, as the new capacities get created, the problem of coal shortage
will have to be addressed. Review and monitoring of coal import will need an
For an enhanced energy security, it had been decided that the public and
private sector power companies should acquire coal mines abroad. While some
of the private organisations have been more proactive, in case of public
sector companies, actions have been slow. In the next two to three years
targets in terms of acquisition and of million tonnes of production from
such mines abroad could be fixed and monitored.
With the production of gas from the KG Basin and consequent allocations to
the existing gas based power plants, the Plant Load Factor of these plants
will definitely improve from the present level of about 60% to about 90%.
Future increase in gas production could lead to substantial power capacity
additions. Ministry of Power and Ministry of Petroleum and Natural Gas could
work out, in next three months, as to how additional 10,000 MW, if not more,
could be planned to be commissioned in next 2 ? to 3 years. Gestation period
of gas based power plant being shorter, if this decision is taken now, it
should be possible to get these capacities within this Plan period.
For the ambitious capacity addition programmes to fructify and for
generating right level of confidence among bankers and financers to ensure
such expansions, it would be imperative that distribution sector reform
continues to occupy the right priority. APDRP may focus on 1,000 towns
including the 600 plus District Headquarters. Focus may slightly be
realigned from the State as a whole to the town specific projects. Capital
cost and sequential deliverables may be predetermined and implementation
carried out accordingly. In all these towns, wherever the AT&C loss is more
than 20%, the States may be asked to agree to introduce Franchisee Schemes
as a pre-condition to cover these towns under APDRP. It needs to be
recognised that the Franchisee Scheme, implemented in Maharashtra, has
proved very effective, and some of the States including U.P. have taken
action in respect of a few towns. This needs to be extended to 1,000 towns
in the next two to three years.
Delhi Model has finally vindicated itself, though it did undergo somewhat
longer gestation. From AT&C levels of 48 - 60% as in 2001-02 to now between
18 - 25%, in different zonal companies, is indeed a remarkable achievement.
This Model has also provided a few learnings. Keeping these in view, we
should target to replicate this initiative in a number of cities.
Under Rajeev Gandhi Grameen Vidyutikaran Yojna, the Scheme of Franchisee was
started in a few States. It has been slowed down. Franchisee is an essential
condition of this Scheme. Without this, the whole RGGVY will be
unsustainable. We must insist on the States that they should implement this
provision or else the benefit would not be available.
With the rising demands for power, it is unlikely that the shortage
situation will be eliminated in next 5 to 10 years. The first impact of
shortage is passed on to the rural area with massive load sheddings.
Decentralised Distributed Generation, using the rural distribution
infrastructure, free of cost, may become a workable solution to this problem
in a number of States.
Several initiatives have been taken on Energy Conservation. On lighting and
cooling/heating of office buildings, it should be made mandatory for all the
State Governments to cover all their large office buildings under Energy
Audit and consequent energy efficiency projects. This may be a programme of
next one year.
Most of the Schemes by the
Bureau of Energy Efficiency were started with the initial approach of
voluntary compliance. While this approach may continue for new initiatives,
the earlier ones must now be made mandatory.
These twenty five Action Points
do not obviously cover everything that needs to be done, nor has an attempt been
made to include comprehensively all the issues. However, they do represent the
most important tasks which should receive urgent attention.