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Development of Electricity Infrastructure in Uttar Pradesh, Shri R V Shahi, Former Secretary, Ministry of Power

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:

  • Ganga Expressway from Ghaziabad to Baliya connecting Western and Eastern U.P. - cost Rs. 30,000 Crores.

  • Network of other Express ways including Ghaziabad - Saharanpur - Kalsia Expressway, Bijnor - Fatehgarh Expressway, Jhansi - Gorakhpur Expressway, Lucknow - Nanpara Expressway and Agra - Kanpur Expressway - costing Rs. 47,000 Crores.

  • Power generation Rs. 25,000 Crores.

  • Urban upgradation Rs. 12,000 Crores.

  • Public Transport initiatives Rs. 1,000 Crores.

  • Others approx. Rs. 10,000 Crores

  • Total Rs. 1,34,650 Crores.

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:

  1. 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.

  2. Within India 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.

  3. 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%.

  4. Electricity 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.

  5. 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%.

  6. 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 9.6%

  7. 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.

  8. 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 guarantees.

  9. 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.

  10. 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.

  11. Distribution 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 implemented.

  12. Electricity Act 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 Policies.

  13. 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.

  14. 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.

  15. 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.

  16. 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.

  17. 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.

  18. The existing 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.

  19. Though, some 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%.

  20. 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 infrastructure.