Why Power Sector Reforms Are Crucial For Make In India
There is little doubt that when the Narendra Modi regime took charge in 2014, the Indian economy was in a shambles. Policy paralysis coupled with crony capitalism had converted the most promising economy in the world to a cesspool of uncertainty and despair. A classic example of this came about in 2012 when the entire northern grid supplying power collapsed leading to stalled factories and trains. The sorry state of the power sector was a mirror of the sorry state of infrastructure in the country. No economy can grow at a fast and sustained rate without adequate infrastructure. And India was falling into a vicious infrastructure trap.
The regime realized that infrastructure needed to be fixed urgently. So a lot of emphasis and care seemed to have been devoted to this while the Union Cabinet was being formed. A surprise pick was Piyush Goyal who was given charge of both power and the coal ministries.his brief was simple: to revive the ailing power sector so that it does not become an impediment to the planned Make in India initiative. And Goyal indeed inherited a big mess. State-owned electricity boards were completely bankrupt. The state-owned Coal India had spectacularly failed to produce enough coal, leading to coal imports of almost 250 million tons by 2015. Higher import costs of coal made a large number of mega power projects unviable. Then again, the failure of gas supply crippled gas based power plants. There could be no growth and no Make in India without enough electricity.
Even as he inherited such a disheartening mess, Piyush Goyal seems to have done a remarkable job in turning around the critical power sector. As a first step, he brought about dramatic efficiencies in the operations of Coal India Ltd. te here has been a steady and sustained growth in output from the mines. There was a danger of output slipping below 400 million tons when Goyal took over. Now, the same company is confident of crossing 600 million tons in the near future. As a result, there has been a dramatic decline in coal imports and it is estimated that imports will fall to almost 100 million tons by the end of next year. The next major revamp was a transparent auction of coal mines to private players that will lead to a massive jump in domestic production in a few years as the new mines become operational ( Thanks to a scam, the Supreme Court had canceled coal mine allocations some years ago). Another major revamp has been the UDAY scheme designed specifically to reform the ailing state electricity boards and improve their operational efficiencies. The most spectacular success has been on the renewable energy front. More than 10,000 MW of new solar capacity has been added domestically in 2016. Tariffs have fallen below Rs 3 per unit; tariff for even wind energy has fallen dramatically to just above Rs 3.60 per unit.
One can safely say today that no new manufacturing plant or any other faculty set up under the Make in India initiative will face a power supply problem. Credit must go to Piyush Goyal for this.