Source: Claudio Schwarz/CC BY-NC-ND 2.0
POWER TARIFF: STATES PROPOSE DECREASE BUT CENTRE PROPOSES INCREASE
Monthly Power News Commentary: March – April 2017
India
It is well known that subsidies for power is appropriated by those with the highest consumption within the limits of the subsidy slab. Subsidies for agricultural power is largely appropriated by the farmer who has the largest pump and the largest piece of land. Likewise maximum subsidies for household consumers always go to those who consume more of the subsidised power. This is the conclusion reiterated in a study by Brookings India which has quantified the extent of subsidies. Poor households who consume less than 400 units a month that is the limit to subsidies apparently get ` 1000 per year as rebate while consumers who take in more than 400 units a month rake in ` 9000 a year in rebates. The ` 1,600 crore power subsidy is said to be eight times more than allocation for the Smart City project, more than one-third of the total budget for medical and public health services and nearly 20 per cent of the total budget allocated for education.
However this is not a conclusion that would corner the ruling party in Delhi. This is exactly what all other parties ruling all other states in India are doing. Delhi does not have agricultural consumers and so power subsidies are offered to households (voters) who account for 80 percent of power consumption in Delhi. In states that have large agricultural consumption, subsidies are offered to both households and farmers. The ruling party at the centre promotes restructuring of power tariff to reform the distribution end of the power sector but offers generous power subsidies when it is a ruling party in a state and also protests when tariff is hiked when it is an opposition party as in the case of Bihar.
A young French economist studying the Indian power sector summed it up beautifully: If the Soviet Union was communism plus electricity India is democracy plus electricity. One could raise a big hue and cry over power and energy subsidies in India if we define subsidies narrowly as a problem of economic inefficiency. But the problem is far more nuanced and complex but only simplified views are taken note of.
The blame game for the dire state of the power sector in UP has begun. The current government has accused the previous government of understating electricity demand in the run-up to the recent assembly election to gloss over the power crisis in the state. The CEA data shows that the energy deficit in UP in January 2016 stood high at 11.5 percent. The energy requirement was showed at 8,340 million units against supply of 7,384 million units. In January this year, the state showed 0.8% deficit, with demand of 8,747 million units and availability of 8,673 million units. In the past few months, UP had started calculating electricity demand to meet power supply for 18 hours against the norm of 24 hours. The previous government is also accused of signing bilateral power purchase deals at high cost while cheaper power was available. Apparently a legislation that envisages jail for power theft, a strategy borrowed from the so called Gujarat Model that seeks creation of dedicated police stations to deal with power theft cases is on the cards. The state government estimates that there is about ₹150 billion worth of dues from customers which include surcharge over delayed payments. A white paper is needed on the UP power sector to expose the “deep rot” of past 15 years, “mind-boggling and terrible” data on the situation says the new government. UP will sign the 24×7 ‘Power for All’ (PFA) document, which aims to provide round-the-clock affordable electricity. The UP Chief Minister has ordered 18-hour power supply in villages, 20-hour at tehsil level and in Bundelkhand region besides deciding to ink a pact with the Centre to ensure electricity in all UP villages by 2019. The CM directed the officials to ensure uninterrupted supply to the villages from 6 in the evening to 6 in the morning so as to help the students prepare for exams. It has also been decided to change defective transformers within 48 hours not in 72 hours, the time fixed earlier, and 24 hours in urban areas. All BPL households in the urban and rural areas of UP will get free power connection while those APL will be given 100 percent financing option with easy EMIs. According to the power ministry, the major decisions that were taken during the meeting included giving free electricity connections to the urban and rural BPL households and to APL households at reasonable EMIs by giving 100 percent financing option. These electricity connections would be given without any discrimination on caste or religious lines and would be based on the latest Socio-Economic Census data, it said. Further, it said that an amnesty scheme would be given to all those households and commercial connections that want to take legal electricity connections. Other important decisions that were taken during the meeting include making 100 percent feeder separation and smart metering expeditiously, waving off of interests on electricity dues and provision of option of EMIs to pay off the principal amounts and bringing in zero government official discretion. The UPERC constituted an investigating authority to probe into the distribution loss figure reported by UPPCL in feeders of Saharanpur and Ghaziabad in January 2016.
Telangana CMs promise of nine-hour uninterrupted free power supply to the farm sector is causing tremors in the ground water department as the water table is hitting new lows in Telangana. The government’s free power sop to the farmers commenced about 8 months ago. The ground water department submitted a report to the state government cautioning it on overexploitation of ground water in several districts. The energy department too has started feeling the heat of the 9-hour power supply. Thanks to the dwindling ground water level, farmers are operating their agricultural bore-wells without a break. To meet the ever increasing demand, the distribution companies have been purchasing power from the exchanges on a daily basis to meet the demand. As a result, purchase of power is crossing 500 MW per day due to the intense heat conditions and increased demand from the agriculture sector.
Farmers across the state owe ₹170 billion to Maharashtra State Electricity Distribution Company Ltd. This amount is a cumulative of their bills of electricity consumption for pumps that they use in their fields to draw water from the wells for last several years. The state gives power to farmers at subsidized rates for atleast 8 hours a day. A scam to the tune of ₹500 billion has been executed by signing ‘illegal’ PPAs with the six private power producers by state government, alleged the Delhi Government on the basis of the documents procured under the RTI Act 2005. Not only the PPAs were signed with all the five on the same day, but two of officials who signed it on January 5, 2011, were not even posted on the designations which empower them to sign those agreements, however they signed it showing fake designations. These illegal PPAs forced state to pay ₹ 21.63 billion every year to these companies even as power is not purchased from them, as state is power surplus, alleged the government.
The Uttarakhand government has alleged that the previous government had “favoured” some gas based plants while entering into power purchase agreements which had led to a hike in electricity tariff in the state. The previous government struck a deal with gas based power plants in Kashipur to purchase power from them for 35 years at the rate of ₹ 4.70/unit at a time when its rate should have been just ₹ 2.74/unit, causing a loss of ₹ 500 million/month to the state exchequer. The Uttarakhand Electricity Regulation Commission had recently effected a 5.72 percent hike in power rates evoking sharp reaction from opposition Congress which had criticised it saying that it would increase the burden on the common people. Those wishing to get into politics must take note of the close connection between political power and electrical power!
The NTPC Tamil Nadu Energy Company Ltd has issued a notice for regulation of power supply to Tamil Nadu, Telangana and Karnataka to the extent of 1,229 MW from its Vallur Thermal Power Station (1500 MW), for non-payment of long outstanding dues of ₹ 13.88 billion. The JV was formed for setting up a 1,500 MW coal-based power station at Vallur, Ennore in Tamil Nadu utilising the existing infrastructure facility at Ennore and supply power mainly to Tamil Nadu and also to Kerala, Karnataka and Pondicherry.
The government has identified old power projects totalling 7,738 MW capacity owned by the Centre and states for replacement with energy-efficient supercritical plants, which will generate a gross 18,560 MW. The replacement will result in creation of 18,560 MW of capacity as per the assessment of power generation utilities. The move is expected to not just save natural resources, but help in boosting generation capacity of the plants. The 440 MW of the Haryana Power Generation Corp in Panipat will be replaced with an 800 MW energy efficient plant, which will almost double the generation capacity. Breaking down the numbers, state power generation utilities have marked out 6,608 MW for the purpose, which will lead to creation of 16,580 MW. The central utilities have marked 1,130 MW for replacement that will create 1,980 MW, going forward. According to power ministry estimates, as on March 31, 2016, the capacity of coal-based thermal plants that are more than 25 years old was about 37,453 MW, including 35,509 MW in the government sector and 1,947 MW in private space.
Andhra Pradesh started its journey with a power deficit of 22.5 million units per day when it came in being after bifurcation in June 2014. Within a year, it transformed itself to a power surplus State. In the past 33 months, it has the distinction of achieving 100 percent electrification to become third State in the country to achieve this. On April 11, 2017, the State Grid managed to handle the demand of 7233 MW when the demand and supply was 169 million units per day. Given the current demand supply situation and requirements, the State utilities are confident of meeting the increased demand during the summer months and claim they can meet the energy need of up to 200 million units per day. The State-owned energy generator AP Genco too managed to add capacity commissioning expansion and new project at Krishnapatnam.
India’s power deficit dropped to a historical low of less than 1% last fiscal, thanks to record electricity generation capacity added over the last few years, adequate coal stocks and transmission facilities, coupled with meagre growth in electricity demand. The deficit was lowest since the CEA started maintaining the reports in 1992. The demand-supply gap for power in the period between April 2016 and March 2017 was at 0.7%, down from 2.1% in FY16, CEA data showed. In March, the deficit was at 0.3%, the lowest for any month, down from 0.5% in February. The All India electricity requirement grew 2.5% year on year to 1142 billion units in the last financial year, CEA data showed. In FY16 the growth was 4.2% at 1114 billion units. All India peak energy shortage — the maximum demand requirement faced by the country — in last financial year was at 1.6%, down from 3.1% in the previous year. The fall in power deficit levels may simply be due to lacklustre demand and poor attendant offtake.
30,000 rural feeder meters are connected to national power portal and the remaining 75,000 will be connected by December 2017. The Rural Feeder Monitoring Scheme is to monitor the quality and quantity parameters of power supply in rural areas of the country. The entire data shall also be hosted on National Power Portal on real time basis and may be accessed by various stake holders through web services. The Urja Mitra launched by the minister, is an application which provides a central platform for state power distribution utilities to disseminate power outage information to rural as well as urban consumers through SMS/email/push notifications. Consumers can also view real time power outages in any part of the country, lodge complaints.
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