In the race to provide power at affordable rates, Modi – government has taken several initiatives. These include increase in supply of cheaper domestic coal, rationalization in coal linkages [giving more to energy efficient generation plants], strengthening of transmission and distribution [T&D] systems, financial restructuring to reduce interest burden, enabling gas based power plants to access gas at cheaper rates [via pooling of imported LNG with domestic gas], incentive to states for reducing theft etc. However, there is one area where there is unprecedented scope for reducing cost of power supply and yet, it has not got the desired attention and even where the ruling establishment takes considerable interest and wants to act with alacrity, the efforts are frustrated by...
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Category: Tariff Policies & Subsidies
SOME CARROTS BUT NO STICK
Modi’s new bailout package for State Electricity Boards is fine. However, he will need to force compliance In 2012, the UPA Government had granted a financial restructuring package of Rs2,00,000 crore, to deal with the debt of ailing State Electricity Boards. As part of the package, 50 per cent of the SEBs outstanding liabilities were taken over by the respective State Governments and the balance was issued to public sector banks at nine per cent interest. In return, the States were to increase tariff and reduce transmission and distribution losses to ensure that the realisation from sale of electricity equals the cost of procurement in two to three years. The objective was to eliminate losses and make SEBs stand up...
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SEB reform – catch the bull by horn
In 2012, the erstwhile UPA – government had granted a financial restructuring package [FRP] to deal with a mammoth Rs 200,000 crores debt of ailing state electricity boards [SEBs]. Under it, 50% of the outstanding liabilities were taken over by respective state governments and for balance 50% bonds were issued to public sector banks [PSBs] carrying an interest as low as 9%. The FRP was conditional on states taking requisite steps to increase tariff in a calibrated manner and reduce transmission and distribution [T&D] losses in order to improve realization from sale of electricity so that it converges to its cost of procurement. The overarching objective was to eliminate losses in 2-3 years and thus ensure that they are no...
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Cut theft and freebies to stem power losses
The Centre must deduct the discoms’ losses from the devolution of taxes to the erring states On September 12, 2015, the chief secretaries of states whose state electricity boards (SEBs)—that carry out power distribution—met Union power minister Piyush Goyal with a demand for a fresh bailout package to deal with the SEBs’ accumulated debt of over R3 lakh crore. Goyal took a bold stand by turning down the request. SEBs have already got two bailout packages—R40,000 crore in 2002 and around R2 lakh in 2012. These were given on the promise that SEBs will adjust tariff to plug gaps between revenue and the cost of electricity, besides reducing transmission and distribution (T&D) losses. But, they have failed on both fronts and...
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Modi must rein in power theft and freebies
On September 12, 2015, chief secretaries of states whose power distribution companies [PDCs] are making losses had a meeting with union power minister, Piyush Goyal. This was followed by a meeting of PDCs officials with prime minister on September 14. They were demanding support from central government in dealing with their accumulated losses of over Rs 300,000 crores. To be precise, they wanted these liabilities to be extinguished so that they start on a clean slate. Contrary to expectations, Team Modi has categorically rejected any bail out. This is a bold stance. Since 2002, PDCs got two bail out packages [Rs 40,000 crores in 2002 and around Rs 200,000 crores in 2013]. These were granted on the promise that they...
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REGULATE ELECTRICITY SUPPLY SYSTEM
The malady afflicting the power sector in Delhi is suggestive of a deeper mess in the country and calls for prompt action During his first shot as the Chief Minister of Delhi, Mr Arvind Kejriwal promised that he would slash power tariff by 50 per cent. He did so, primarily on his conviction that the power distribution companies indulged in financial irregularities, leading to inflated cost of procurement and distribution, which were approved by a pliable Delhi Electricity Regulatory Commission. A clear indication of how the DERC played to its masters tune (under the Sheila Dikshit Government) can be gauged from the fact that former DERC chairman approved 23 per cent reduction in tariff in 2010. After he was removed,...
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Stemming rot in power sector – Kejriwal shows way
During his first shot as Chief Minister, Delhi, Arvind Kejriwal had promised 50% cut in power tariff. He did so primarily on his conviction that the power distribution companies [PDCs] had indulged in financial irregularities leading to inflated cost of procurement and distribution. These were approved by DERC [Delhi Electricity Regulatory Commission] acting under diktat of then political dispensation [a clear indication of how regulator was forced to play to his masters tune can be gauged from the fact that the then chairman who had approved 23% reduction in tariff in 2010 was removed and his successor affected hike of 22% in 2011 and a further 32% in 2012]. Kejriwal’s plan was to nail these irregularities and recover excess sums...
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State electricity boards – ‘Achilles heel’ of India’s power landscape
A major ingredient of Modi – government’s development agenda is un-interrupted supply of power 24×7 to industries, services, agriculture, households et al in required quantity at affordable price. It plans to reach this goal in less than a decade. Undoubtedly, it is making unstinted efforts in all vital areas viz., adding to the generation capacity [a big chunk in solar power to make our systems environmentally benign]; making arrangements for fuel supply especially coal and gas to run power plants at optimum load; augmenting and strengthening the transmission and distribution (T&D) infrastructure [by involving private sector through a competitive bidding process] and providing last mile connectivity through a well-spread out network of feeder lines etc. However, one area of concern...
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Gas-based power plants ‘woes’ – look for permanent solutions
True to its commitment to filling the cleavages in system left over by a decade of policy paralysis and mis-governance under erstwhile UPA dispensation, Modi – government has sewed up a package for resurrecting 24,000 megawatt (mw) of power generation capacity based on gas. For starters, 14,000 mw of capacity with an investment of Rs 60,000 crores is lying dormant (no generation at all) due to absence of fuel linkage. Another 10,000 mw with Rs 40,000 crores blocked is operating at sub-optimal level i.e. below 30% due grossly inadequate supply of domestic gas. The relevant plants were commissioned in anticipation of abundant supplies from prolific KG-D6 field off Andhra coast [this discovery was made in 2002 and initial development plan...
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DISBAND THE CULT OF FREELOADERS
To fix the crumbling power generation and distribution systems, the Modi regime has to crack down on the political class that promises free or cheap electricity. All other steps, such as amending the Electricity Act, are just cosmetic Inaugurating the first Renewable Energy Global Investors Meet & Expo (RE-Invest), Prime Minister Narendra Modi wondered how political parties could promise to supply electricity at reduced rates when their States are dependent on electricity supply from outside. The remark was targeted at the Aam Aadmi Party which, in its election manifesto, had promised to cut electricity bills by half, even as Delhi gets nearly 70 per cent of its power from other States. In 2015-2016, Delhi’s total power requirement is expected to...
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