A K Bhattacharya: Power games

RAISINA HILL

New ways are being planned to dress up the poor performance.

India's power sector today ails not just from inadequate addition to generation capacity. An equally disturbing development is the ad hoc manner in which the Union power ministry has been planning to tackle this problem. Against a scaled down target of adding 34,000 MW of power generation capacity during the Tenth Plan (that will come to an end in less than nine months from now), the actual net addition to the existing capacity will be around 15,000 MW.

So, what is the power ministry doing about this? Well, you could look forward to a few innovative attempts within the ministry to dress up the numbers to present a better picture than what the woefully low addition of new capacity in the last five years would otherwise suggest. For instance, an idea doing the rounds is to take credit for the 5000-MW of captive power generation capacity that was created in the private sector during the Tenth Plan period. Now, never in the past has the addition of captive power generation capacity been included while calculating the total capacity created in any Plan period. Moreover, not all power generated by the captive units can be evacuated and wheeled through the grid for use by the utilities.

The irony of this exercise is that the need for creating captive generation capacity arises primarily because of the failure of the Plan programme to add the targeted generation capacity. And now the consequence of the government's failure will be utilised to indulge in some window dressing. Adding another twist to this irony is the realisation that the government failure to meet the capacity creation targets also hurts the economy in another way. The cost per unit of electricity generated by a captive unit is a little higher than the standard size of units put up by the utilities and generation companies.

Another idea doing the rounds is to add all the new power generation capacity created in the renewable energy sector to the capacity created through conventional sources of power generation like thermal, hydel and nuclear. So far, the government's Plan programme has no provision for targetting capacity addition in the renewable energy sector. Thus, the targets are to be achieved from thermal, hydroelectrical and nuclear power sectors. So, if the contribution of the renewable energy sector is included in the overall performance in the Tenth Plan, the final figure would look a little less embarrassing. But the hard reality and its consequences for economic growth cannot be escaped.

Not that the power ministry did not plan anything at all to make good the shortfall that it feared from the third year of the current Plan period. It focussed on setting up mega thermal power projects. Each of these projects was expected to have a capacity of 4,000 MW. A lot of work has been done. Eight shell companies that would set up these ultra mega power projects have been floated as subsidiaries of Power Finance Corporation. An initial seed capital of Rs 5 lakh has been given to each of them. Meetings have been organised with potential investors. Yet the problem is that completing a 4,000 MW project takes time and these can be completed only before the next Plan period. So, the problem for the current Plan period remains unresolved. One more Plan period of five years will be written off as a complete loss as far as creating the much-needed power capacity in the economy is concerned.

And the hope that these ultra mega power projects will be up and running by 2012 may also remain unfulfilled if the manner in which these projects are being executed are an indication. For instance, the distribution companies (discoms), which would eventually buy the power to be generated by the mega power projects are not yet on board with a memorandum of understanding with the shell companies. Without the discoms on board, investors in the generation projects are not sure who will they deal with and whether there will be some guarantee for the offtake of the huge amount of power each of the projects will generate.

With a fully functional national grid yet to be commissioned and no viable payment mechanism in place, potential investors in the ultra mega power projects are now a little wary. True, several foreign investors, including those from the US and China, have shown interest in setting up these projects either on their own or in partnership with Indian companies. But unless the question of guaranteed offtake and a credible payment mechanism is settled, the target for adding fresh capacity in the Eleventh Plan through these ultra mega power projects may also turn elusive.