The Hindu Business Line : Charging up the power sector

Look at what China has achieved on the power front in the last two decades. In 2006, the country’s energy generation grew by 13.5 per cent to 283 million kW. The output touched 147 million kW in the first six months of 2007, 15.9 per cent higher than in 2006. More than 80,000 MW of generating capacity was added by end-2006, of which, more than 52,800 MW using coal. The country’s total power generation capacity rose to 6,22,000 MW up from 5,37,000 MW in 2005 and in 2007 it touched 7,31,000 MW.

In 2007, the six nuclear plants in China generated 62 billion kWh of power, which represent only 2 per cent of the country’s power output. The installed capacity of these plants will be enhanced from the current 8,850 MW to 40,000 MW and the number of nuclear power plants will go up to 40 by 2020.

India in comparison

In the late 1980s, India was adding about 4,500 MW a year. In the Seventh Plan, about 21,400 MW was added to take the total capacity to 63,985 MW. In the same period, China, whose grid size was twice ours, was adding around 9,000 MW a year — that is, a rate of growth more or less similar to ours.

Though during the Eighth, Ninth and Tenth Plans we doubled our capacity — 1,44,500 MW as on date — it is still only about 20 per cent of China’s capacity. How did China manage to accelerate its power programme? The leadership had a clear vision and focus and empowered those involved to achieve the objectives.

The three pronged growth plan consisted of:

bulk ordering of capital equipment of the same design and thus standardising the design across the country;

indigenisation of the capital equipment by insisting on transfer of technology — the volumes justified equipment makers setting up factories in China and transferring the technology; and

focus on long-term import of coal as well as developing coal mines within China.

The way forward

What should India do to accelerate growth in the power sector?

The most important is the opinion building process among the stakeholders, as to the speed at which the reforms should move forward. Those with vested interests among the stakeholders are exploiting the freedom and preventing the growth of reforms.

To avoid dual control, the power sector must be shifted to the Central list from the Concurrent list.

States do not have the capacity to provide the required resources, especially fuel and finance.. One option could be to leave the bulk distribution — privatisation or otherwise — to the States, and take over transmission and generation to the extent that the existing assets owned by the States can be bought over at market prices so that the States would be adequately compensated for. That there have not been any significant additions to generation by the States over the last fifteen years justifies this approach.

Power sector growth is totally dependent on availability of equipment, most of which are currently imported. The country does not have enough capacities and so there are no economies of scale for a large manufacturer to set up facilities to make turbines or large boilers.

Moreover, the competitive bid environment makes it more uncertain for anybody to set up a facility of any size.

There is an urgent need to standardise project specification across the country for the next 100,000 MW or so and give firm orders to manufacturers of boilers, turbines and other critical accessories at a negotiated indexed price, subject to the condition that they set up the facilities, transfer the technology and deliver within a specified timeframe.

Coal mining

Availability of fuel, particularly coal, which will continue to be the most dominant fuel in the country this decade, is another major issue. Private mining has not taken off as the allocation policies have prevented investments from coming in easily.

The private sector in India does not have the required expertise to accelerate growth in coal mining. Further, Coal India has a big lead over other players and is a fair market player. Therefore, huge investments must flow into Coal India, to modernise the existing mines and open up new ones on an emergency basis.

What is needed is a strong and focused political leadership without vested interests. The leadership has to rise above narrow sectoral conflicts, keeping in mind the larger interests of the country.

(The author is a power consultant . Responses to blfeedback@thehindu.co.in)