The Hindu Business Line : Reliable power still a distant dream

There have been several legislative initiatives and reforms to get the power sector going, but they pale into insignificance when one considers the continuing lag between demand and supply. A lot more needs to be done, especially if the country is to achieve the stated goal of “power for all” by 2012, says N. RAMAKRISHNAN.

From the time of Independence, power has always been in short supply — the power that lights up homes and offices, helps run industrial machinery and pump out water into agricultural fields to grow foodgrains and fruits, and is widely used as a barometer of economic development and progress. This deficit situation in electricity supply continues despite numerous efforts over the years to build generation capacity so that economic growth is not stymied. However, the r esults on the ground have not kept pace with the efforts that have been put in and there is every danger that lack of adequate power, along with the overall poor quality of infrastructure, will cripple growth.

Legislative measures

Over the years, there has been no dearth of legislative initiatives starting with the Electricity (Supply) Act, 1948 to the much-debated and umbrella legislation that revamped all the earlier ones, the Electricity Act, 2003. There have been innumerable attempts to reform the power sector with the Centre even goading the States with incentives to reform their power sector. Some have acted, with limited success; others cite this limited success as a reason for not doing anything.

The power deficit is reflected in the frequent power outages, the frequent voltage fluctuations and the huge investment in captive power generation by power-intensive manufacturing industries. Besides, the per capita consumption of electricity — widely used as an index of development in any society — has increased from a mere 15 kilo-watt hours (kWh) a year at the time of Independence to just about 450 in the last 60 years. This figure is miniscule compared to the world average of 2,320 kWh. The Government’s goal is to achieve a per capita electricity consumption of 1,000 kWh by 2012, when it hopes to also fulfil another ambitious target — “power for all.” At the time of Independence, a handful of coal-fired or hydro-electric generating stations had a total installed capacity of 1,360 MW. Significantly, a bulk of this capacity was in the private sector. The installed capacity has now increased by nearly 100 times to 1,32,330 MW with a mix of fuels — coal, lignite, gas, liquid fuel, hydro, nuclear and renewable energy sources. Coal continues to be the fuel of choice accounting for more than half of the installed capacity with hydro-electric power contributing close to a quarter. The anticipated growth in nuclear power has not happened and the contribution of renewable energy sources is still marginal.

Alternative sources

Ironically, the First Plan (1951-56) document talked of generating power from alternative sources. “Among the fuels derived from growing vegetation, alcohol, which can be manufactured from molasses, mahua flowers, etc., alone has good prospects in India. Until atomic power and solar energy come into the field, the development of power resources in India can only be from coal, oil and water.” And, we are still talking of tapping alternative sources. In contrast, China has said it will have 20,000 MW of wind power in three to five years and is well on its way to achieving that target, despite starting off only now. However, the First Plan document was way off the mark for other renewable energy sources, especially wind power. It said: “The production of power from sources such as tides and winds is by its nature limited.” It might have been right about power from tides, but the document did not anticipate the contribution that the wind energy sector could provide. Wind power accounts for a little over 7,000 MW and with an estimated potential of 40,000 MW, which in some reckoning is actually higher, there is good scope for tapping this green source. States are alive to this potential and some have put in place policies to attract higher investment in the sector. But, as in most other initiatives concerning the power sector, the efforts are just not enough with different arms of the administration working at cross purposes.

Role of private sector

Due to sustained policy decisions over the years, the role of the private sector in power generation has dwindled and now accounts for about a tenth of the total generating capacity. In a reversal of the policy of the early years of Independent India, the Centre from the early 1990s began actively canvassing for greater private role in power generation albeit with limited success. The state of the electricity utilities, with limited ability to honour their bills, is one of the reasons for the private sector’s tepid response to all these efforts and for the chronic shortage of electricity.

Consider this passage from the First Plan document: “Cheap electric power is essential for the development of a country. In fact, modern life depends so largely on the use of electricity that the quantity of electricity used in a country is an index of material development and of the standard of living attained in it… Extensive use of electricity can bring about the much-needed change in rural life in India. It cannot only improve methods of production in agriculture and encourage cottage and small-scale industries but can also make life in rural areas much more attractive and thus help in arresting the influx of rural population into cities.”

Demand for electricity

It holds true even now. Yet, cheap power — and more importantly, reliable power — is still a distant dream. Rural household electrification is still low; less than half the rural households have a power connection while continued influx into cities is a reality now. The growing demand for electricity comes not just from the manufacturing sector or farm connections which need to pump out water from greater depths, but from the numerous high-rise buildings — be they for the information technology sector or the shopping malls and multiplexes — that are being built at a feverish pace in all the metros and second-rung cities. These buildings are power-intensive as they require power round the clock.

A nearly 100 times increase in installed generating capacity is indeed a significant achievement. The power sector too is not without its achievements. The point to note is that the achievements so far pale into insignificance when one looks at the continuing lag between demand and supply. A lot more needs to be done, especially if one were to achieve the stated goal of “power for all” by 2012, which, going by the track record of adding generating capacity, is nearly impossible.

There have been several legislative initiatives to get the power sector going, starting with the Electricity (Supply) Act, 1948, which was meant to facilitate faster development of the power sector. Electricity boards were set up in the States, ostensibly to speed up development in the sector with all new generation, transmission and distribution activities coming under the boards.

It did result in faster development of the sector but soon the boards found themselves financially hamstrung, resulting in the boards not being able to add capacity to keep pace with the growing demand. In the mid-1970s came the decision to set up Central Government-owned undertakings such as the National Thermal Power Corporation (now NTPC Ltd) and National Hydroelectric Power Corporation. Now, NTPC is the single largest generator in the country owning a little more than a fifth of the total installed generating capacity in the country.

SEBs and viability

Setting up of State electricity boards, in hindsight, was probably the biggest mistake as far as the power sector was concerned. The boards became monoliths and administration suffered. They were not allowed to function on commercial lines. Tariffs were so unrealistic that most often they did not even meet the cost of generation and supply.

On the whole, the sector was just not viable. It is this kind of a set up that the reform measures have been trying to change. The problems are known to all and are just beginning to be addressed.

“The inability to expand generating capacity, strengthen transmission networks and improve distribution systems reflects the financial sickness of SEBs. They do not have the resources to invest themselves nor have the credibility to attract private investors,” says a report by the Planning Commission’s expert committee on an integrated energy policy for the country. Yet another Planning Commission document sums up the state of the power sector eloquently: “…Despite these achievements, the power sector remains locked in a situation that is fundamentally unsustainable.”