The Lucknow Management
Association organised a very impressive Convention on November 22, 2008 at
Lucknow to discuss on "Creating World Class Infrastructure - Policy
Imperatives". The Convention addressed the issues concerning modern and
sustainable urban infrastructure, industrial growth through infrastructure,
challenges in building rural infrastructure, innovative ways of developing
social infrastructure, extension of telecom and creating world class power
supply infrastructure. I was invited to address the Conference on Power
Infrastructure. More than 500 delegates participated and the Convention emerged
successful as expected.
While I would briefly mention
about some of the important initiatives taken by the Government of Uttar Pradesh
in the various sectors of infrastructure, I will describe, in detail, the issues
that I articulated on electricity sector. Some of the initiatives that the
Government of U.P. have launched are as follows:
Thus, The Government of U.P.
is seriously pursuing a number of initiatives to promote development of
important infrastructure in the State. Each of these segments contributes
towards the overall development of the State and improvement in quality of life
of people. Road connectivity is one of the most important requirements for
enhancing the level of economic activities and power is equally essential.
On the power front, the salient
aspects of the presentation, that I made, include not only the issues directly
connected with U.P. but also broader aspects of power development initiatives at
the national level. The points made are outlined below:
India has to go a
long way in enhancing the level of per capita electricity consumption. At
around 630 Kwhr per year we are one of the lowest in the world. In China it is
close to 2000 Kwhr and for some of the advanced countries the figure is as high
as 20,000 Kwhr.
itself there are serious regional disparities. There are States where per
capita consumption exceeds 1,500 Kwhr. There are atleast half a dozen States in
which the per capita consumption is more than the national average of 630 Kwhr.
But, there are also a number of States in which per capita consumption is less
than 100 Kwhr. In U.P. also the consumption is one of the lowest at 360 Kwhr.
Rural India is at
a very disadvantageous position. As national average, more than 55% of rural
households have yet to be provided electricity connectivity. There are twelve
States in the country in which rural connectivity, in terms of household, is
less than 30%. Of these there are six States (Assam, Bihar, Jharkhand, Orissa,
U.P. and West Bengal), in which rural household connectivity is less than 20%.
connectivity in rural area is not to be seen only from the point of view of
providing lighting. In fact, transformation of rural economy is totally
dependant on reliable supply of power. In the States which are deficient in
respect of rural electricity connectivity, the level of economic development is
also comparatively poor.
India has embarked
upon a growth projectile for the next 25 years which would most approximately
correspond to what China could do in the last 25 years. Power is the most
important determinant of GDP growth. If China could grow at the rate of 9 to
10% in last 25 years, it was primarily because power generation at similar
growth rate supported various economic and industrial activities. In India
electricity generation growth of 3 to 4% in the past could not support a growth
of more than 5 to 5.5%.
Even in the
beginning of the Xth Plan, we were struggling at electricity
generation growth of 3.1 - 3.2%. With vigorous monitoring, this could be raised
to 5.2% in the middle of the Xth Plan and to 7.3% in the final year
(2006 - 07) of the Xth
Plan. As a result, the GDP growth in the year 2006 - 07 was a record high of
Some of the
States, for example Gujarat, are contributing towards the national GDP growth in
the range of 10 to 12% as their own annual growth because they are able to
generate and supply electricity in a more reliable manner.
A major part of
the problem of U.P. electricity sector can be attributed to the general
structural issues of the whole of the power sector of the country, though there
have been a number of issues which have been unique and more predominant in so
far as U.P.'s power sector is concerned. Until Electricity Act 2003 was
legislated, a number of other statutory Policy instruments such as National
Electricity Policy and Tariff Policy were put in place, capacity addition
programmes in the entire power sector suffered heavily. In the last few years,
following the above legislative and Policy instruments and also a few other
important Schemes such as APDRP, there have been substantial changes in the
approach and outlook of project developers and financiers. It is possible today
to get power projects funded and developed even without aspiring for Government
Success of Ultra
Mega Project Scheme of the Government of India fully vindicates the position
that power sector now presents itself in a significantly different way than was
the situation just three to four years back. All the generating transmission
companies and coal supply companies are being paid fully by the electricity
distribution Companies/Boards. Even in 2001-02, by when the arrears on
Electricity Board had accumulated to a staggering level of Rs. 41,000 Crores,
the generating companies like NTPC were being paid only to the extent of 76% of
their bills. The situation was that none of the generating companies, even in
the central sector, were able to generate surplus which could be ploughed back
into their expansion. In a way, their entire profit, and to a great extent,
even their depreciation was not available in terms of cash flow. From 2003-04
onwards the situation changed and in last four years there have been absolutely
no problem with regard to payment of bills for electricity supplied by
generating companies to the distribution utilities.
There has been a
major shift in the mindsets of Administrative and political establishments.
They have stared recognising that they cannot expect to get electricity from
generators for their distribution Companies and Boards, if they did not pay to
them adequately and in time. This type of reform has been facilitated on
account of the Schemes of the Government of India mentioned above. However, we
cannot say that commercial issues are no longer a problem in electricity
distribution. Though, various reform measures have, no doubt, helped in
bringing them to a level that they are able to pay to the generating companies
and transmission companies, but, that is not good enough. What is needed is
that these reforms should help them to generate financial surplus which they can
use to expand their generation capacity and transmission and distribution
infrastructure. This is not happening in most of the States.
reform did receive required attentions and priorities during the Xth Plan. What
is needed is that this should not only continue but various Schemes linked to
distribution sector reforms must be further pursued and more vigorously
2003 provides a number of avenues and opportunities to create a vibrant and
competitive electricity market structure in the long run. Implementation of
this Act in various States has been to varying degrees of perfection. There are
States which have taken up most of the provisions for implementation in a
serious manner. There are States which are at a very initial stage of
implementing a number of provisions of this Act and of accompanying statutory
In U.P. reorganisation of State Electricity Board into generation, transmission and
distribution companies has happened. It is a positive development. Regulatory
Commission was put in place at appropriate time. The Commission issued a number
of tariff and other notifications. But, at the stage of implementation there
have been issues which cause concern.
Open Access in
distribution is not a reality in the State of U.P. and therefore to that extent
the power sector of this State suffers from problems of competition just as many
other States also do have similar problems.
While on reorganisation of the U.P. Electricity Board we can be satisfied with, same may
not be the case in so far as operationalising these companies, providing them
necessary autonomy, placing senior level team in these companies etc. are
concerned. If these issues had been attended to properly the outcome of
reorganisation of the Board may have been more fruitful and rewarding.
The State of U.P.
has an installed capacity of the order of approximately 5,000 MW (both of their
own as well as from the private sector). Approximately, similar amount of about
5,000 MW is available to U.P. by way of their share in the central sector power
generating companies. It needs to be mentioned that this is one of the largest
share to any State of the country in so far as the entitlement from central
generating companies is concerned.
While from a State
like U.P. one could expect a better annual growth in the capacity addition, even
if U.P. had provided of 5% annual growth to its power generation capacity, in
last ten years, the installed capacity should have been increased by atleast
3,000 MW. It is however very unfortunate that in a period of as long as ten
years the State could add only 630 MW. A lot of the problem of electricity
supply in the State can be attributed to such a poor performance on capacity
addition over a long period of time.
installed capacity in the state sector, in spite of some marginal improvement in
the recent past, is performing at not more than 60% Plant Load Factor. It is
relevant to mention that the national average Plant Load Factor itself now is
close to 80%, more than 30 power stations of the country are performing in the
range of 85 to 95% Plant Load Factor. There is considerable scope, therefore,
to improve the availability and Plant Load Factor in the power plants of the
State. Even if they operated at a PLF at par with national average atleast
1,000 MW of additional power could be available.
improvements have been noticed in respect of transmission and distribution loss,
even now the average Aggregate Technical and Commercial Loss in electricity
distribution is as high as 36%. In many towns and cities the losses are in the
range of 50 to 60%. This severely affects the financial health of the State
power sector. If the situation is not improved, sustainability of capacity
addition programmes, of rural electrification, of transmission system
augmentation and as a matter of fact of any expansion of the sector, would be
unsustainable. The key of success, therefore, lies in how best the State power
sector is managed, so that these losses are brought below 15%.
The silver lining
in the sector, however, is on their recent initiatives to create additional
generation capacity. U.P. has been one of the few States which have been
following the Ultra Mega initiative of the Government of India to select
developers on the basis of Competitive Bidding for tariff. They have been
successful in identifying the developer for the 1,000 MW thermal project at
Anpara where the work is already in progress. Another project of 1,320 MW at Karchana has also been decided to be developed in the private sector. A third
project of 1,980 MW at Bara has also been decided to be developed in the private
sector. Rose Project of 600 MW is under execution by private sector. The State
has decided to add 10,000 MW of capacity, of which the above projects are
already in progress. Thus, quite deviating from the previous track record which
is characterised by non-performance over almost 15 years, these new initiatives
present a gratifying picture of seriousness of the State towards generation
capacity addition programmes.
My address was followed by
Question Answers Session. One of the questions was whether the Central
Government has been fair in allocating capacity from the central power
stations. The thrust of the question was that the State had been treated
unfairly. I clarified that U.P. has about 4,900 MW of capacity allocated from
central public sector power generating companies. This is the highest for any
one State. Another question related to measures taken by the State Government
in the matter of control of theft of electricity. I clarified that extent of 50
to 60% of loss in many towns and cities clearly indicates that the distribution
companies as well as the State Government have failed to take effective steps to
control theft of electricity. This has to be projected at the social stigma.
Those indulging in theft and those employees conniving with consumers must be
subjected to severe punishments. Some of the States which took effective steps,
with rewarding results, include West Bengal, Andhra Pradesh, Gujarat etc. U.P.
has a long way to go in so far as arresting the problem of theft of electricity
in the State is concerned.
It does not need to be over
emphasised that the State's efforts towards building world class infrastructure
can succeed only if the State succeeds in setting right the electricity