Agenda for new Government to make power sector vibrant
Agenda for new Government to make power sector vibrant
The over dependence on private sector for the reforms in power sector is not good for the country and the country needs a balanced approach.
After more than two decades of power sector reforms in India it has failed to ensure adequate supply of electricity in the country, bring down AT&C losses, make the power sector vibrant, viable and profitable, bring in the benefits of competition in power generation and distribution by way of reduced tariff and better consumer services.
The very purpose of Electricity Act 2003 was to reduce the losses in Power sector, improve the financial health of the sector & reduce the subsidy burden of Government. But due to faulty execution of policies the contrary has happened. The financial health of power sector has further deteriorated & Government is now even subsidizing private DISCOMS. What is more serious is that due to continued wrong energy policies banking sector may collapse under the burden of non-performing assets being generated by Power Sector.
Electricity Act 2003 envisaged that with the setting up of independent regulators and distancing of government from tariff matters, the state distribution utilities would be able to achieve financial viability and there by restore the financial health of the power sector.
While state Discoms resorted to loans from the banks and financial institutions to meet operational deficits, it has now resulted in a position of debt trap for many of the state power utilities.
While financial restructuring plan (FRP) is being imposed on states which is forcing the states for introducing privatisation for the reduction of AT&C losses through introduction of input based distribution franchise. The government has overlooked the cases of state sector Discoms of Andhra, Tamil Nadu, Karnataka and Punjab where the AT&C losses were reduced under public sector ownership. The government has also overlooked the poor performance of private sector Discoms where the technical losses remain high and the financial health has not improved.
New government should review power sector reforms and make necessary amendments wherever needed. The practical model adopted by Andhra Pradesh Eastern Discoms and Punjab have actually achieved remarkable results in reduction of AT&C losses could be considered and adopted by the other states having higher level of AT&C losses as an alternative to the proposal of input based distribution franchise or any other model of privatisation.
The concept of achieving low tariffs through competitive bidding in Ultra Mega Power Projects (UMPP) has been completely defeated by the changes made in terms of reference after award of contract by giving various concessions to successful bidders. Private sector companies have been successful in getting the tariff revised from CERC despite signing of MOU’s with state utilities for long term supply contracts on one pretext or other.
While the tariff policy of Government of India stressed for setting up of new projects under competitive bidding, several state governments have gone in for MOU route of cost plus tariff for new projects which will result in higher tariff and costlier power to the consumers. The new government must clearly lay down the policy guidelines.
Government must ensure that no further amendments are made in Electricity Act without the completion of review of power sector reforms .It may be mentioned that Union Power Ministry has proposed anew segment named ‘supply license’ in addition to existing generation, transmission, distribution and trading licenses. The main aim of this is to further develop power market rather than improving the performance of the sector.
Autonomy & independence of Regulators has been completely eroded as it has been captured by vested interests due to interference by state governments even in tariff matters under the clause of public interest. Most of regulatory commissions are headed by retired bureaucrats who are enjoying all powers without any responsibility.
The crisis being faced by Indian Power Sector threatening to undermine the economic survival of the nation & oppose those who are advocating the retrogressive energy policies which are plunging the country into darkness.
There is over 20000 MW of stranded generating capacity due to coal shortage. Coal India is not supplying full quantity of coal to the thermal plants which have already been completed. These plants are being asked to go for imported coal which will increase generating cost for which there may be few buyers.
With the thrust on capacity addition in private sector, several States are now in a condition of surplus power during part or most of the year. This is resulting in a situation whereby ate thermal power stations are ordered to be backed down or shut down so as to enable these private sector thermal stations to operate at optimum or full load
Gas power stations are lying idle due to costly natural gas. Priority of allocation of gas to NTPC stations and state gas power stations should be ensured at economical rates as a measure to safeguard CPSU/ State Utility finances.
Central electricity Authority which played a major role in power development of country has been completely sidelined. Now there is no central agency to look after the coming of need based generating station across the country. Now thermal plants are being constructed without looking in to geographical needs of country.
There is an urgent need to place an alternate agenda for the reforms in power sector by the new Government for power sector development in the country to meet the national aspiration of electricity for all at affordable cost.
V K Gupta / Secretary Finance / Northern India Power Engineers Federation