For almost two decades now, the successive governments have made exhortation about reforming the fledgling power sector with the three-fold objective of (i) supplying electricity at affordable rates; (ii) reducing the burden of subsidy and (iii) make power distribution companies (discoms) viable. Whether, it is the provision for reform the power purchase agreements (PPAs), ‘open access’ under the amended Electricity Act (2003), reducing cross-subsidy so as lower tariff to industries and businesses, increasing the share of renewals in total supply, opening of power exchanges for trading of electricity, direct benefit transfer (DBT) of subsidy to the target beneficiaries and so on, the aforementioned objectives resonate in each of these reforms. Yet, it is ironical that when it comes to developing...
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Category: Fuel linkages
Corona pushes discoms to the brink
Even as Corona has triggered widespread devastation, a major casualty is the power sector. Following the nation-wide lock-down announced by the Prime Minister, Narendra Modi on March 24, 2020 [this was an absolute must given the hyper-contagious nature of the virus and an overarching need to pre-empt community transmission], most of the industries and businesses besides Railways [passenger segment] have downed their shutters. This has meant complete destruction of nearly 40% of the total electricity demand. All consumers – be it industries, shops and establishments, households, farmers etc – buy their electricity requirement from the power distribution companies [discoms] [earlier known as state electricity boards (SEBs)]. Mostly owned and controlled by state governments they in turn, source power from independent...
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Boost renewable but not at the cost of existing non-renewable assets
During an interactive session at Bloomberg Global Business Forum [GBF] on September 25, 2019 coinciding with the United Nations General Assembly [UNGA], Prime Minister, N Modi faced a dilemma on the issue of clean energy versus coal based power. Even as Modi reiterated his commitment to rapidly promote use of renewable energy viz. solar, wind, bio-mass, small hydro [India has more than doubled its original goal of having 175,000 mega watt (MW) of power capacity on renewable to 450,000 MW; it is also the founder of International Solar Alliance (ISA) jointly with France with 121 countries having already joined the ISA], he was confronted by CEO, Bloomberg on what plans he has with regard to use of coal [India has...
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Latest solar scheme is a non-starter
The Government’s launch of the KUSUM programme to promote solar power bodes well for farmers, DISCOMs and the environment. But there are impending challenges, including a huge financial liability on farmers themselves. Moreover, will they really be willing to join the scheme? In a recent interview, Minister of State for Power and Renewable Energy RK Singh informed about a scheme viz the Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM), which the Government proposes to implement over a period of three years. Intended to promote the use of solar energy in rural areas, KUSUM allows a farmer to use his barren land — currently lying fallow — to set up a solar plant on it for 1 MW or so (in...
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Shun populism, salvage discoms
During the financial year 2018-19, 31 State-run electricity distribution companies [discoms] are reported to have incurred financial losses of Rs 21,658 crore. Coming as it does after a declining trend in their losses during the previous two years [from about Rs 52,000 crore during 2015-16 to Rs 32,000 crore during 2016-17 and further down to about Rs 17,000 crore during 2017-18], this raises concerns. To understand the reversal during 2018-19, it is important to analyze as to why their losses declined in the previous two years. In November 2015, Modi – government had launched Ujwal DISCOM Assurance Yojna [UDAY] to revive the ailing discoms. Under it, they were given a financial restructuring package [FRP] that involved takeover of 75% of...
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Power battles – the consumer loses, yet again
In a bid to give a boost to power generation in India and make it available at ‘affordable’ and ‘stable’ rate to the consumers, in the first decade of 2000s, the then government had mooted the idea of ultra mega power projects [UMPP]. Two such plants were bagged by Tata Power Ltd [TPL] and Adani Power Ltd [APL] under tariff-based competitive bidding [TBCB] each with installed capacity of 4000 MW and 4620 MW respectively. While, TPL is based entirely on imported coal, APL uses 70% domestic and 30% imported coal. The projects were committed to supply power to state electricity boards [SEBs]/power distribution companies [PDCs] at fixed tariff all through project’s operational life. The tariff in case of TPL was...
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Power NPAs – don’t bail out defaulting promoters
In a bid to resolve mounting non-performing assets [NPAs] of public sector banks [PSBs] in a time bound manner, on February 12, 2018, the Reserve Bank of India [RBI] had issued an order requiring banks to initiate resolution of stressed assets – the so called special mention account [SMA-2] wherein either the loan or interest is in default for 60-90 days. As per the above circular, as soon as there is a default in the borrower’s account with any lender, all lenders – singly or jointly – shall initiate steps to cure the default. The resolution plan [RP] may involve any actions/reorganization including, but not limited to, regularization of the account by payment of all over dues by the borrower entity,...
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Power projects – flirtation with public money
In the midst of public sector banks [PSBs] losing lakhs of crore due to the so called non-performing assets [NPAs] – a sophisticated nomenclature for sheer loot of public money by dubious businessmen/industrialists acting in collusion with pliable politicians and bureaucrats – one comes across reports of the ‘government nudging bankers to take criminal action against independent power producers [IPPs] that have inflated project costs’. The diktat is a follow-up to the new power minister RK Singh last year hinting at the government’s intent to investigate ‘whether private developers gold-plated project costs’. He had suspicion that IPPs inflated project costs to raise a higher amount of debt to cover their equity component—a practice called ‘gold-plating’. This has far reaching ramifications. Let...
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Power reforms – piecemeal measures won’t work
The union power minister, RK Singh has convened a meeting of state power ministers to discuss comprehensive reforms in the power sector to discuss among others measures (i) to uphold sanctity of power purchase agreements [PPAs] between generators and state electricity boards [SEBs]/power distribution companies [PDCs]; (ii) curbing wasteful electricity consumption; (iii) remove cross-subsidy surcharge and (iv) direct benefit transfer [DBT] of power subsidy. Before discussing the reforms at the outset, it is important to take cognizance of the problems facing the sector and the source of their origination. First, SEBs/PDCs, the life-line of power sector are incurring huge losses – a phenomenon seen for over two decades. Unable to make timely payments to power generators – public sector undertakings...
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UMPPs – stop treating generators with kid gloves
When, subsidies and in turn, fiscal deficit gets out of control, the eyes of the whole nation are set on it and all institutions, experts and financial wizards frantically look for steps to set things right. But, when it comes to dealing with factors that cause hike in subsidies/deficit, everyone turns a nelson eye; instead of taking corrective measures, they abet actions to perpetuate the malady. The case of ultra mega power projects [UMPP] vividly illustrates this. Tata Power Ltd [TPL] and Adani Power Ltd [APL] had bagged such projects 4000 MW and 4620 MW respectively under tariff-based competitive bidding [TBCB] to supply power at fixed tariff all through project’s operational life. The tariff in case of Tata was Rs...
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