Vandana Gombar: Power situation - What's in store?

INSIGHT

The country is facing a power crisis. Peak power shortage went up to 17.1 per cent in January this year (15.5 per cent in January last year) while the average power shortfall during the month is a little below 13 per cent. Capacity addition has been half of what was planned at the beginning of the year and there is no relief on transmission and distribution (T&D) losses, which eat up over a third of the power generated in the country. Power ministry officials are, however, unfazed, thanks to a unique credo evolved in Shram Shakti Bhawan, which houses the ministry. Here are the key underpinnings of that credo:

Aim High "" For 10 per cent GDP growth, target 20 per cent. For 10,000 Mw capacity addition, target 20,000 Mw

Instead of trying to narrow the gap between promise and delivery, most senior power ministry officials believe that the way to push the system is to set aggressive targets. So if half of the targeted capacity gets added in any five-year plan "" that is the story in the last three plans "" the trick is to finalise a target that is double of what is actually expected to come through. And since no one in the government is ever penalised for missing targets, it is not as if anyone is risking a job here. In the current year, the targeted addition is over 16,000 Mw while the actual addition so far (until January) is a little over 7,000 Mw, which is not even 45 per cent. The formula works. Bingo! Incidentally, Finance Minister P Chidambaram spoke about a plan to "redouble" efforts in the power sector in his Budget speech, probably to ensure that targets are met in full (100 per cent) rather than in half (50 per cent), setting the stage for a credo clash. For those who are interested, the only other area where Chidambaram spoke about a "redoubling of effort" was to save the tigers.

Throw money at the problem ""the more, the merrier

The cabinet recently cleared a mammoth $7 billion (Rs 28,000 crore) package for rural electrification in the 11th plan (2007-2012). That is a huge layout for a developing country that has spent over a year flip-flopping over a $5 billion quasi-sovereign fund. The key question, however, is whether rural households will get electricity, after this mega spend over the next four years. Well, the villagers never got any telephone when the average user was cross-subsidising rural capex. Rural telephone penetration increased only when there was a viable business model developed for rural telephony based on user charges. In power, we are still in the high cross-subsidy phase where "free" power schemes are being peddled. The leak needs to be stemmed. That is a tougher (read political) problem which should not hold up investments in the power sector, goes the argument in the ministry.

Talking solves problems "" the placebo effect

The main problem plaguing the sector, as we all know, is the high level of transmission and distribution losses, which are as high as 45 per cent in some states. While action has been limited, there is no shortage of exhortations. In the meeting of chief secretaries of states called to discuss power issues last month, Power Minister Sushil Kumar Shinde suggested "better governance and administrative practices, restructuring of utilities to make them more focused (eight states are yet to unbundle), deployment of better manpower and use of better technology" to reduce T&D losses to less than 15 per cent. The credo "" moral suasion (read talking) can solve the problem of power theft!

Private Sector "" Nah!

While it is a fact that the addition to capacity by states and by the central government has been much below targets, the private sector has also not been able to deliver. In fact, while the states and the Centre at least achieve 40-50 per cent of the target, the private sector in this year has managed less than 10 per cent. You cannot rely on the private sector for power. Deliverance has to come from the government.

It is going to be better next time around

When we started this year, we were supposed to do much better than last year because a "bottom-up" approach to planning had been adopted, and a whole new monitoring system was in place. In fact, the country would have the targeted 5 per cent surplus power (spinning reserve) by 2012 by when the Power For All mission would also be realised. All equipment ordering for the 78,577 Mw capacity targeted in the 11th plan was to be completed by December last year to ensure that the projects would definitely be commissioned within the plan period. The new deadline is now March 31, 2008. The justification for the delay is that the country is facing a shortage of the main equipment (boiler-turbine-generator) and of what is called balance-of-plant equipment. Don't worry though, it will be better next year.