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The country's power situation needs attention

May 03 2013, 15:36   |   By Entrepreneur

By Bharat Banka

In the last couple of years, the ground situation on the new plans to add power generation facilities is turning from bad to worse. There have been various contradictory views on realistic achievability of the Twelfth Plan of the Planning Commission which estimates targeted addition of more than 75,000 MW during the five years. However, the broad issue at ground level remains in case this target is not achieved in totality (which looks like a serious possibility). An emerging view, call it cynical if you will, is that more than half the nation would have to go without electricity for more than half a day, every day of their lives.

Slowing growth rate
The view might seem radical but cannot be discarded absolutely as it is important in all contexts, including in respect of a slowing Indian economy targeting to reach GDP growth CAGR of 7-8 percent over the next four-five years. Would it be possible without the additional power generation? What about the non-industrial users?

The plan also talked about more than 90 percent of the targeted additional capacity to be coal-based projects and harped upon the need to make adequate domestic coal available. And, meeting shortfall through imported coal, while recognizing the impact on increase in tariffs. It stressed upon the need to increase production of domestic coal as well. But, importing coal from Australasia and other zones have become increasingly difficult over the last couple of years.

Back home in India, the entire episode of allocation of coal mines and even sale of coal to power producers is going through its own challenges. One reason can be the general conundrum and pandemonium about decision-making and policy-making. However, one strong stated and unstated driver on the subject also appears to be a notion. While the state provides access to quantum of concessional coal for generation of power at the expense of the exchequer to benefit the common man, such access leads to unjustifiable super-normal profits in the hands of the power producers. And the eventual cost for the super-normal profit is being footed by household consumers and hence, planned loss to exchequer may not be resulting in intended benefits for
the household.

Are end-users benefited?
For a moment, let's work on the assumption that a critical hindrance is the issue of benefits not reaching intended users in a principally essential utility service, which is a state responsibility towards its citizens. While there are tariff regulating bodies at state levels and the concept of fuel adjustment charges etc. are evolving, what about modeling power generation on the lines of the fertilizers industry and the recent concept of direct cash transfer to the actual end-users?

The fertilizer industry has worked for decades on the principle of a fair return on capital employed for the fertilizer manufacturers, who depend on the state for inputs and the input cost being a pass-through. Doesn't the power generation industry look similar in its characteristics and wouldn't it follow the same principles? This would meet the requirements of all stakeholders i.e. the state meeting its responsibility to provide affordable utility service, the power manufacturer making a regulated but fair return on capital and the end-consumer receiving quality utility service at affordable rates, subsidized for inputs like coal provided by the state.

(The views expressed here are personal)

© Entrepreneur India April 2013
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