Transmission and Distribution: Last mile is the longest

NDA govt electrified about 1,100 villages in first year

In its first year the National Democratic Alliance (NDA) government was able to electrify only 0.2 per cent of census villages, according to the Central Electricity Authority (CEA). About 1,100 census villages were put on the power grid map. In contrast in the previous five years under the United Progressive Alliance (UPA), the percentage of villages electrified had risen from 84.4 per cent to 96.5 per cent, reports the authority.

Of the 5.97 lakh villages, 19,766 are still grid connected. The remaining ones are more difficult to reach. The numbers on census villages also hide underneath the hamlets and habitations within that are alsohooked up individually to the grid. If one looked at these as well the NDA's performance would seem better. The government could easily ramp up its efforts as the UPA record shows.

It's the last-mile connectivity that lags behind at the moment; 96.7 per cent villages are connected but 33 per cent households - around eight crore out of 24 crore (according to 2011 census) - do not have electricity. This too could be fixed with just a little more effort. In just three years (2011-14), Andhra Pradesh provided connections to roughly 11 lakh households. Rajasthan added five lakh over the same period. Thus, cumulatively all states put together would have added substantial numbers in the period from 2011-14. The RGVY scheme for BPL households alone added over 55 lakh households between 2011-14. By the time the NDA government took over, the target would have been reduced substantially. Merely working at the pace that AP has, could add roughly four crore households by 2019.

Ensuring household connectivity could be relatively easy. The real test is twofold: One, to spread the transmission grid widely and efficiently from power producers to distributors by 2019. Two, the more difficult test to pass is to ensure that debt-ridden distributors bounce back to health and are able to set progressive tariffs that reflect the true cost of power. This is where politics could trump even a very determined government.

The current transmission system is insufficient to transfer power from surplus parts of the country to deficit parts. A former head of Central Electricity Regulatory Commission says, "States are not being able to buy cheaper power because of transmission bottlenecks." With lack of grid connectivity, states get locked in to buying power from costly but linked up generators in the vicinity.

At the end of the 11th Plan, the inter-regional transmission lines capacity stood at 27,750 Mw. The target for the 12th Plan was 65,550 Mw. As on May 2015, 46,450 Mw was achieved, leaving a balance of 19,100 Mw for the remaining two years of 2015-17. But the NDA hopes to achieve a target of 27,400 Mw in these remaining two years. Then, in the 13th Plan period (2017-22), it plans to add another 52,800 Mw of inter-regional transmission lines to cater to power generation capacity of 4.6 lakh Mw. For this, the CEA estimates in its perspective plan that another Rs 2.6 lakh crore would be required in the 13th Plan. The power minister has suggested the transmission sector needs Rs 1 lakh crore, for now.

The perspective plan by CEA, which includes targets to be reached by 2022, was developed before the AP plan for 24/7 power was ready. So there is some mismatch in deadlines. The AP plan looks at creating the full transmission capacities by 2019. It estimates the inter-state transmission network strengthening, which includes building a green energy corridor, to cost about Rs 23,284 crore. The AP plan also notes the crucial role the center would have to play. It says "Apart from financial assistance, non-financial interventions, some as directions to public sector companies are requested from the government of India".

A greater financial commitment from the union government bundled with political heft would be needed to fix the most trenchant of problems the Indian power sector faces - the mounting losses of state distribution companies. The burgeoning fiscal burden leaves them with no choice but to manage their finances by curbing power purchase and limiting supply to consumers. Power minister Piyush Goyal writes, "Annual operating losses of distribution companies are at around Rs 70,000 crore every year, with accumulated losses of Rs 2,52,000 crore and total debt of Rs 3,04,000 crore."

Goyal adds, "This situation persists largely due to rampant and unbridled power theft. The national average for Annual Technical & Commercial losses is around 25 per cent." Competition in the distribution sector could bring down these losses but could increase the burden on state-owned companies unless their tariff structures are also freed.

Sorting out problems of distribution to provide 24x7 supply will depend on how well Prime Minister Narendra Modi can implement his mantra of 'cooperative and competitive federalism'.

While issues of fuel supply, logistics, generation and transmission fall under the central government's domain, distribution is under state governments. All the reforms proposed in the distribution sector such as open access, privatisation of distribution networks, tariff increases fall in the domain of the state. Rationalising tariffs is the toughest task. But it is must, as the former head of CERC explains: "Many states are simply not purchasing power. This is because of a complete mismatch between the cost of buying power and the tariff charged from the consumers."

Any upward restructuring in tariffs is, quite naturally, a political minefield that few states can afford to tackle. Take the case of Rajasthan, where an analysis was carried out to look at distributors would fare under different tariff regimes. Only when tariffs were projected to increase at a high rate of 16 per cent for three years consecutively did the distributor cross the red line.

With the agricultural sector in deep stress, charging farmers for power at higher rates looks politically unfeasible. For the Union government to convince and help states move to a more rational tariff regime perhaps is the leap that could help NDA reach its 2019 deadline of power for all.