A big headache for Modi – government is galloping losses of state electricity boards/power distribution companies [SEBs/PDCs]. This had a debilitating impact on their ability to supply electricity to consumers and industrial/business establishments despite plentiful availability [courtesy, huge step up in production and timely supply of coal to generating stations besides big boost to renewable energy]. The logic is simple. Since, SEBs/PDCs are perennially incurring loss [as on September, 2015, their accumulated loss stood at Rs`380,000 crores and outstanding debt at Rs`430,000 crore], they are unable to make timely and full payment for their purchase from independent power producers [IPPs]. So, the latter suspend supply which former cannot make up by increasing generation from their own plants either as due...
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Category: Tariff Policies & Subsidies
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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Energy sector reforms – face political hurdle
The government’s premier think-tank Niti [National Institute for Transforming India] Aayog has firmed up the National Energy Policy [NEP] and the first draft will soon be made public. An overarching objective of NEP is to bring about comprehensive energy sector reforms that could free up sectors such as coal, electricity and fertilizers of subsidies and price controls and help produce more power and make generation projects commercially viable for private companies. It lays out a clear roadmap for lowering subsidies on fertilizers and power by aligning their prices to the market. The policy also seeks to improve the financial condition of power distribution companies [PDCs], which are presently bogged down by huge debt to make the sector profitable – in...
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DOLES TO ELECTRICITY BOARDS DAMAGING
States must bring an end to ‘competitive populism’ and discipline loss-making power boards. They should check their monopoly over power distribution The Union Government has set up a committee to look into restructuring tariff to reduce the burden on industrial units, by making domestic and commercial consumers of electricity pay more (most States categorise those consuming more than 800 units a month as large domestic consumers). The committee will work on classifying consumers in two to three categories and sub-categories to bring transparency in power billing. What is the trigger? At the outset, it is important to know as to (i) why industrial consumers are currently paying more, and (ii) what is the justification for seeking reduction in tariff applicable...
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Electricity tariff – robbing Peter to pay Paul
The central government has set up a committee consisting of the officials of states and power ministry to look into restructuring tariff to reduce burden on industrial units by making large domestic and commercial consumers of electricity pay more [most states categorize households consuming more than 800 units of power a month as large domestic consumers]. The committee will work on classifying consumers in two to three categories and sub-categories to bring transparency in power billing. It will also study the possibility of increasing fixed charges on connected load of domestic consumers to encourage them to surrender un-utilized load. What has triggered thinking along these lines? At the outset, it is important to know as to why industrial consumers are...
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Stymied by populism
ELECTRICITY REFORMS : One major reform that has been sacrificed at the altar of populism is the provision for ‘open access’ under the amended Electricity Act (2003). Under the Narendra Modi dispensation, even as reforms are progressing on several fronts, ironically, electricity is one area where implementation is hamstrung by political establishments in majority of the states, including the BJP-ruled ones. The reason being they are embracing populism in the form of supply to certain segments such as farmers, poor households at low tariff, or even free, and letting thefts happen. One major reform that has been sacrificed at the altar of populism is the provision for ‘open access’ under the amended Electricity Act (2003). Under this policy, which was...
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Electricity reforms – ‘open access’ stymied by populism
An over-arching component of prime minister Modi’s good governance mantra is effective implementation of the laws and policies & programs of the government. He has amply demonstrated this in several areas viz., DBT [direct benefit transfer] of LPG subsidy, Jan Dhan Yojna [JDY], MGNREGA etc with substantially positive outcomes. However, electricity reforms is one area where proper execution is hamstrung primarily due to non-cooperation from states. At the core of reforms initiated by present dispensation in the power sector is improvement in the functioning of state electricity boards [SEBs], greater regulatory oversight over SEBs and power generators besides creating conditions for enhanced competition in the sector so that consumers get the benefit in terms of lower tariff and better quality...
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UDAY – no panacea for SEBs woes
One of the major accomplishments of Modi – government during its two years stint has been in alleviating the constraints facing power generation companies/entities. It has done so by increasing production of coal by Coal India Limited [CIL] and filling all voids in the evacuation, transportation and distribution infrastructure to reach supplies to generating stations. It has also helped gas based power plants by arranging supplies of gas at lower rates enabled by pooling of imported LNG [liquefied natural gas] with cheaper domestic gas. The cost of LNG itself has been brought down drastically by re-working an existing long-term 25 year contract with RasGas [Qatar] to align the formula with its low current international price [courtesy, low crude price]. It...
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It’s all just power play
Electricity boards and consumers are being systematically short-circuited by the robbing-Peter-to-pay-Paul policy Tata Power Ltd bagged a 4000 MW ultra mega power project based on imported coal in Mundra, Gujarat, under tariff-based competitive bidding to supply power at fixed tariff of Rs. 2.26 per unit all through the project’s operational life. Likewise, Adani Power (APL) bagged a UMPP to supply to Gujarat and Haryana at Rs. 2.35/Rs. 2.94 a unit. In April 2013, the Central Electricity Regulatory Commission (CERC) allowed compensatory tariff(CT) of Rs. 0.524 per unit to TPL for all its buyers. APL was allowed CT at Rs. 0.851 per unit and Rs. 0.364 per unit for supplies to Gujarat and Haryana, respectively. The CT was meant to neutralise...
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Power conundrum – robbing Peter to pay Paul
In April, 2013, Central Electricity Regulatory Commission (CERC) in its interim order, allowed a ‘compensatory tariff’[CT] of Rs 0.524 per unit to Tata Power Ltd (TPL) 4000 MW ultra mega power project (UMPP) based on imported coal in Mundra, [Gujarat] for all its buyers. Likewise, for Adani Power, UMPP [4620 MW] it allowed CT of Rs 0.851 per unit and Rs 0.364 per unit for supplies to utilities in Gujarat and Haryana respectively. The CT was meant to neutralize increase in price of imported coal consequent to decision of Indonesian Government in September 2011, imposing a minimum ‘benchmark’ price below which coal cannot be exported. Not quite satisfied with the quantum of relief given by CERC, the Adani/Tata petitioned the...
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