A K Bhattacharya: Electrifying problems

RASINA HILL

The Sixteenth Electric Power Survey has estimated that the peak load power demand in India will cross 157,000 MW by 2012. What this means is that fresh capacity of about 100,000 MW needs to be created if capacity utilisation levels remain what they are and the Union power ministry is still keen on meeting the country's rising power demand by 2012.

By the end of March 2004, the total power generation capacity, available to the grid, was about 112,000 MW.

The big question that should now be agitating the minds of power ministry officials and the power regulator is whether the country will be able to nearly double the generation capacity in the next few years.

The government's track record on this front is quite depressing. It has failed to meet the capacity addition targets almost consistently over the last few Plan periods.

In the Eighth Plan period, 30,500 MW capacity was to be added. But only 54 per cent or about 16,000 MW was actually created. Similarly, in the Ninth Plan period, which ended in 2002, the total capacity creation in the power sector was a little over 20,000 MW, just half of the 40,000 MW target set by the government at the start of the Plan.

The Tenth Plan is due to end in March 2007. And the target of adding 46,000 MW of additional capacity is going to be missed by a substantial margin.

If you check with the government on how large the slippage will be, there are no clear answers. According to some estimates, only 8,500 MW of additional thermal power capacity will be added in the central sector by 2007.

Another 6,000 MW is expected to be created in the private sector and 13,000 MW in the hydro-electric power sector. Assuming that all this happens, the shortfall will be huge and the task during the Eleventh Plan period will be even more daunting.

What should the government do? The least it could do is to draw the right lessons from what the statistics tell. For instance, only 8 per cent of the total installed power generation capacity is in the private sector.

And this was achieved in more than a decade of opening up the power sector to private participation. Clearly, all the incentives the government may have offered to the private industry to invest in power generation have failed to yield the desired result.

Experts point out how the ownership structure of a large section of power producers has been one of the main causes of the failure of the government policies to open up the sector.

What the government has failed to achieve even till today is to enforce that the state electricity boards (SEBs) separate their generation activity from their distribution business.

Mind you, these SEBs still account for over 57 per cent of the total power generation capacity and most of them continue to manage the distribution of the power they generate.

Even though over 35 per cent of the country's power capacity is in the central sector, the power generated by this sector also has to go through the SEBs network in most states.

With the state of SEBs being what it is (in spite of the valiant efforts made by the Centre and several state governments to shore up their finances and allow them to start afresh on a clean slate), even the central power stations are thus adversely affected by the problems the SEBs are suffering from.

The need of the hour, as many experts have pointed out, is to allow private producers and the central power stations direct access to at least large consumers, if not the retail consumers.

The new Electricity Act, 2003 provides for such open access, under which consumers will have the choice to draw their power from more than one power supplier.

They do not have to depend on a monopoly power producer or distributor. Even in states like Orissa and Delhi, where some power sector reforms have taken place, the true benefits of reforms have not yet reached the consumers.

As a result, the power sector continues to be plagued with problems. And prospective investors continue to shy away from this sector.

In the last one year of the United Progressive Alliance government, the power ministry has distinguished itself for taking the least number of new initiatives to break the deadlock. Both the power ministry and the power regulator have to share the blame for this inaction.

With a Cabinet reshuffle round the corner, the least the government could do is to look for a more energetic minister who could grasp the problems of the power sector and initiate quick steps to resolve them.