Amending Electricity Act not the only reform: Power Secretary Alok Kumar

| | Updated on: Dec 17, 2021

Power Secretary Alok Kumar

During this decade, the share of coal in total electricity generation is bound to reduce, he says

The Centre is pushing a multi-pronged agenda to clear bottlenecks in the distribution side which has remained a hurdle to the overall power sector reforms. In an exclusive interview with BusinessLine, Power Secretary Alok Kumar talked about a host of issues that include India being ready to meet COP26 targets, how the country came out of the coal crisis during September-October much faster than China which is struggling with outages, progressive developments in States like Assam and Bihar where the distribution losses have come down and the state of reforms in the sector. Excerpts:

After the compromise with the farmers, do we assume that it is curtains to reforms. Would proposed amendments to the Electricity Act be pushed again?

Amending the Electricity Act is not the only reform. The government is committed to continue reforms. The biggest reform we have taken up recently is the general network access to the ISTS (Inter State Transmission System). It has changed the whole electricity market, the eco-system for the new generators. The CERC (Central Electricity Regulatory Commission) is making regulations. A generator or a load like a discom will be entitled to seek access to the network. Once it is granted, they will have complete freedom on where and for how many years they can sell. You can change your contract every year, you can change your contract every second year. It is one of the biggest reforms which has been taken up.

The second reform is the green open access rules which have been approved by the Power Minister and they are at the legal vetting stage. It will open up many opportunities for green energy producers and consumers to generate and purchase power without going through the discoms. They can even request a discom to supply them with green power or 50 per cent green power. A centralised open access registry will be created. We will also bring a green tariff in that part. As a consumer, if you want to buy green energy from a discom, you can demand that and the discom will supply you at some premium. One can purchase green energy from the discom itself. The cost is a little higher for discoms as lower costs would impact their viability. In case of discoms, pricing is to be seen in totality. It is a pooled cost.

Transmission planning has been completely revamped in the recent past. We have cut down many layers. We will now select mega renewable energy (RE) zones in the country. So, individual generators will not have to apply for access in advance. We will extend the grid to those zones and they will only have to connect to the pooling station.

The broad point is that reforms are a continuous process. In the farmers’ agitation, what has come to my knowledge informally is that they will be consulted about any provision which affects them. There is no provision impacting farmers in the Bill. Of course, taking a decision about the timing of the Bill is up to the government.

There are several forward-looking reforms. For instance, in Appellate Tribunal (APTEL), there is a huge pendency of cases and we want to increase the number of members there. We want to provide for a Member (Law) in every State regulatory commission (SERC) to speed up adjudication of cases.

India has been witnessing reforms for a long time but despite efforts and schemes such as Uday, the State of discom finances is in doldrums and that creates a cycle of gencos not being paid and then Coal India doesn’t get paid. There seems to be little or no progress.

The financial health of discoms should be seen in two parts. The first part is operational, for which a discom is responsible, and the second is that the discom is impacted but someone else is responsible, which are the State governments and the regulatory commissions. In the first part, discoms have improved. When we started the Uday programme, the AT&C losses were in the range of around 25 per cent. They have now come down to around 21 per cent. Discoms have improved their operational efficiency in terms of billing and collection. In the second part, States and regulatory commissions have not improved. State governments do not give the nod for tariff revision, and discoms are not able to revise tariffs timely. Even if the tariff is revised, they (States) do not pay the subsidy they have promised to give. Government departments are not paying the dues of the discoms, and a number of regulatory commissions are not taking into account the full cost. They are leaving revenue gaps or creating regulatory assets. For this part, we cannot blame the discoms. This is with the States and commissions.

The revamped distribution segment scheme has a clear cut component that pre-qualifications pertains to States and SERCs. The pre-qualifications are that you have to pay your subsidy on time, revise power tariffs every year, pay government dues, and do not create regulatory assets. So, States which meet the pre-qualifications will continue to get grants. Once States meet the pre-qualifications, discoms’ performance will be evaluated in terms of losses, deductions, billing and collection efficiency etc. There will be a trajectory for the discoms to move on and if they get 60 per cent marks, then the Centre’s grants will continue to flow. The new scheme is structured to take care of components not covered in Uday. The third important thing was that there was a lag of about 2 years in the auditing account. You were evaluating a programme on the basis of un-audited accounts. This time, every year they have to come to us with the audited accounts and then only we will give the grants. It is a well structured scheme.

We like blaming the discoms, but for their poor financial health; the responsibility lies more with the States and regulatory commissions. For instance, Assam and Bihar are on the right path. Assam has reduced its AT&C losses to below 20 per cent. Bihar is the most progressive. At the same time, Delhi’s regulatory commission is not doing well. They are leaving a lot of uncovered gaps and regulatory assets. If you (States) do not recover your costs, the new government, after five years, will never allow you to recover the costs. Why should they get a bad name when it belongs to the past. So, the State exchequer will have to take over the burden or the consumer will suffer. So, what they are doing is absolutely inappropriate. They are not allowing the concurrent cost in the tariff and the whole sector will suffer in the long term. I think their uncovered gap is close to ₹9,000 crore and some of the costs they have not allowed. What discoms are saying is that this uncovered gap is around ₹23,000 crore. The regulatory assets and the uncovered gap both. So the Delhi regulatory system is a big issue.

To put it in a balanced manner, in the global picture, things are improving. To put it on a country level, annual losses are coming down, AT&C losses are also coming down, and billing efficiency is improving.

We haven’t fully come out of the coal supply crisis, have we? The stocks in some places do not exceed beyond 11 days.

We have notified new coal stocking norms. Earlier, per day meant at what rate you were consuming for the last one week. That was not a good norm as in a period of low consumption, you will report more days and you will take less coal. But when you enter a difficult period, like summer or monsoon, you consume more, so the same stock will be for fewer days. So, we have come out with a new norm. The daily coal requirement at the power plant at any given day will be calculated based on 85 per cent plant load factor (PLF). Based on that, certain days have been prescribed that you have to do that much coal. And now norms are for different months based on coal supply. As per the new norm, our coal stocks are at around 34 per cent by December-end, and in the parlance of days, it is around 11 days. Coal stocks have been improving in the last one-and-a-half month, but not at the pace at which we had targeted. So we are working with the Coal Ministry to ramp-up their coal dispatches further so that we are able to build stocks.

Three things impacted coal supply – Covid-19 pandemic, prolonged monsoon and high imported coal prices that affected the generation from imported coal. But I think we managed quite well, much better than China, in fact. They are still facing outages and huge disruptions which impacted factory production. A lot of our solar power developers are saying that their Chinese suppliers do not have electricity in their factory. They want to use force measures. They are bringing letters to this effect.

We are monitoring the coal supply issue closely to ensure that shortages do not occur next year. The PMO and the Cabinet Secretariat are keeping a watch. We have formed an inter-ministerial committee with Power, Coal, Railways and Environment ministries. But the challenge will remain because generation demand will go up and production has to be ramped-up.

How realistic are our climate change targets, especially given our dependency on coal?

During this decade, the share of coal in total electricity generation is bound to reduce. The absolute number of units producing power using coal will increase as India is a growing country. But coal’s share in power generation will come down. The share of renewable and non-fossil sources will go up. Currently, coal’s share is around 75 per cent, and by the end of the decade, we will be somewhere around 55-60 per cent. It will happen, but it cannot happen in 5-6 years. Those who are talking about climate change, their systems are developed. Their demands are saturated, but India is a growing country. We cannot compromise on our aspirations.

Published on December 16, 2021
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