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Power stats: Reality bites - Views on News from Equitymaster
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  • Feb 26, 2002

    Power stats: Reality bites

    As per the Economic Survey 2001-02, the installed capacity of power generation in the country crossed 102,907 MW by October 31, 2001. India added 1,375 MW capacity between April – October 2001, against a target of 3,776 MW (shortfall of over 60%). Thermal plants at present account for 80% of the total power generation, hydro electricity plants contribute 16% and nuclear plants account for the rest.

    Last year India generated nearly 499.6 billion kWh of electricity (up 3.9% YoY). This year the growth seems to have slowed down. Power generation in April-December, 2001 at 383.2 billion KWh (up 2.8% over the corresponding period in 2000). Thermal and nuclear generation grew by 3.5% and 17.1% respectively, while hydro generation decreased by 3.6%.

    Trends in performance
      Unit 2000 2001* % change
    Electricity generated (utilities only) b kwh 480.7 499.6 3.9%
    (a) Hydro-electric b kwh 80.6 74.5 -7.6%
    (b) Thermal b kwh 386.8 408.1 5.5%
    (c) Nuclear b kwh 13.3 16.9 27.1%
    *(financial year 2001 provisional)

    The all-India energy shortages went up from 6.2% in 1999-00 to 7.8% in 2000-01. The peaking shortages (i.e. shortfall in peak hours) surged from 12.4% in 1999-00 to 13% in 2000-01. These stats underline the urgent need to provide impetus for development of the sector.

    Transmission & Distribution
    The Plant Load Factor (PLF) is an important indicator of operational efficiency in thermal power plants. The average PLF in the Central Public Sector Undertakings (CPSUs) in the 2000-01 and during April-October, 2001 was appreciably higher than that achieved by the SEBs as a whole. Wide inter-state variations are noticed in the average PLF of thermal power plants. Plants in the southern and western regions have shown better performance. The average PLF for Eastern and Northeastern regions continues to be much lower than the All-India level. If the PLF for North East and Eastern states is excluded the PLF of SEBs is not very different from the central utilities

    The SEBs, have continued to suffer from high T&D losses which were at 24.8% in 1997-98, have increased to 25.6 per cent in 1998-99 (provisional). The T&D losses are due to a variety of reasons, viz., substantial energy sold at low voltage, sparsely distributed loads over large rural areas, inadequate investment in distribution system, improper billing, and high pilferage.

    Financial health of SEBs
    Financial health of SEBs has been deteriorating over the years. In 1999-2000 only 7 SEBs had a positive ROR. The number of SEBs with a positive ROR of more than 3% (without subsidy) has also fallen. In 1999-2000 only 2 SEBs (MSEB & TNEB) had a positive ROR of more than 3%. Till April 2001, SEBs had accumulated losses of more than Rs 260 bn.

    Key reforms in 2001

    • An Expert Group was set up under the Chairmanship of Shri Montek Singh Ahluwalia then member Planning Commission, to recommend one-time settlement of all power sector past dues to CPSUs and dues from CPSUs to State Power Utilities. The recommendations of the expert Group have been accepted with minor modification by High-Level group of Chief Ministers for implementation. Link to recommendations

    • In 2000-01, the Government initiated a new Plan Scheme namely the Accelerated Power Development Program (APDP) to provide financial assistance to the States for undertaking renovation & modernization programs of thermal and hydro power stations and also for strengthening and improvement of sub-transmission and distribution network. Under this scheme, a focused investment program has been initiated in 63 identified distribution circles that would be developed as centre of excellence in the first phase of the APDP program. An amount of Rs 9.8 bn was provided to SEBs/ED during 2000-01. An amount of Rs15 bn has been budgeted for release to States during 2001-02 under APDP.

    • The Government of India realized the need for a focused approach to address the issues afflicting states with special reference to their circumstances. The State Governments are thus being encouraged to sign Memoranda of Understanding (MOU) with the Government of India. So far 19 states (Karnataka, UP, MP, Gujarat, Haryana, AP, Maharashtra, Rajasthan, Assam, Punjab, Uttaranchal, Himachal Pradesh, Jharkhand, West Bengal, Orissa, Chhattisgarh, Bihar, Kerala and Goa) have signed MOUs with the centre. The MOUs are broadly joint commitments of the State Government and the Government of India to undertake reforms in a time bound manner.

    • As nearly 75% of the installed generating capacity is in the thermal sector, a number of steps have been taken to refurbish old plants to improve their performance. The on-going 2nd phase of this program covers 44 old thermal power plants. This scheme envisages an additional generation 7,864 MU per annum from renovated units.

    • The Electricity Bill 2001 was introduced in Parliament in August 2001. The Bill seeks to replace the three existing Acts, viz., the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998.

    • A draft Captive Power Policy had been prepared which broadly outlines the guidelines for approval, conditions for usage of captive power, wheeling charges, pricing of power sold to grid and billing methods etc.

    • The primary resources for electrical power generation being unevenly disposed in the country, bulk transmission of electrical power over long distance becomes necessary for supplying the loads. The country’s power system has been organized into 5 Regional Grids, each of which is well integrated, and now with a view to deriving further economies, and increasing reliability, strong interconnections between the regional grids are planned thus creating a strong National grid. It is anticipated that this would be accomplished in a phased manner. By the end of the 11th Five Year Plan (2011-12) a strong National grid will exist in the country.

    Where do we stand?
    Though 2001 has been a landmark year for power sector reforms, India needs a continuous dose of such activism going forward, especially for the development of the power sector. As per estimates, India has to generate an incremental 10,000 MW of electricity every year for the next 10 years to plug the demand-supply gap. More importantly, it has to bring transmission and distribution (T&D) at par with power generation. India’s T&D to generation ratio stands at a dismal 0.3:1, as compared to an international benchmark of 1:1.

    The hidden gross subsidy for agriculture and domestic sectors has increased from Rs 75 bn in 1991-92 to Rs 344 bn in 2000-01. This is projected to go up further to Rs 388 bn in 2002-03. In order to improve the profitability and financial viability of SEBs we need to tackle the key issues such as curbing of T&D losses, tariff rationalization, reducing gap between cost of supply and revenue/ unit of electricity generated. All this will make the electricity business economically viable and in turn this will encourage investments in the sector.

    The restoration of the financial health of SEBs, and improvement in their operational performance continue to remain a critical issue in the power sector.

    The future
    Going by the activism shown by the government in 2001, the future raises hopes of a much stronger power infrastructure in the country. The government has set an objective of providing ‘Power for All’ by 2012. But funds are also required to back up the political will.

    The working group on power constituted by Planning Commission to formulate the 10th Five Year Plan has estimated a feasible capacity addition of 47,000 MW during the 10th plan. This is made up of 24,405 MW in central sector, 12,033 MW in state sector and 10,501 MW in private sector. The funds requirement for these investments would be a huge Rs 5,660 bn.

    A government that continuously exceeds its budgeted deficits is not likely to inspire confidence to bring about the changes it has stated. Still, 2001 has set the tone and the going is only ‘forward’.



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