Goyal’s boast ignores power problems

New Delhi, 31 May

While boasting about high- capacity addition and the price of power going down to zero, Union Power and Coal Minister Piyush Goyal failed to realise that this reflected reforms in the sector since 1998.

Goyal was discussing the achievements of the sector during his “ one- year” news meet last week. Beside what he boasted about, there are problems such as the threat to the national grid because of oversupply and no demand even in scorching summers.

Also, the power price was not zero. It went down to 90p to ₹ 1 per unit during the last week of April and the first week of May. Despite this, power consumers have nothing to cheer about because power distribution companies, or discoms, are not buying the cheap power because they dont have money and the distribution network is poor.

By the end of 2013- 14, the total accumulated loss saddled on discoms across the country was ₹ 2.51- lakh crore. If sector experts are to be believed, this is just the tip of the of the power sector.

“By May, wind power starts coming from southern states and hydro power from northern parts. To meet the estimated demand, even thermal power stations start firing. Then, this summer, stranded gas- based stations will also produce power.

There is enough surplus power in the grid. But discoms in major states — Uttar Pradesh, Bihar, Jharkhand and others are not buying power,” said Rajesh K Mediratta, director ( business development), India Energy Exchange ( IEX).

Delhi, for instance, is estimated to touch peak demand of 5,500- 6,000 Mw during the June- August, which is tied up in advance by the discoms. But on days when the weather suddenly cools during the rainy season, the demand drops by 900- 1,100 Mw.

This excess power is then diverted back in the grid at less ₹ 1 per unit but still has no takers. This destabilises the grid, posing the threat of another snag of the sort which led to the blackout in 2012. The sector was opened for reforms in 1998 with the drafting of Electricity Act, which introduced regulations and framework.

Then, in 2003, state utilities were un- bundled into three separate entities – generation, transmission and distribution — to bring efficiency and provide cheap and quality power supply.

“Since then, slight improvement was noticed only in some of the states. Even today, hardly five state discoms are not in the red.

The transmission and distribution losses of remaining states has remain as high as more than 35 per cent because of free power to farmers and theft of electricity,” said K K Bajaj, chief general manager, Consumer Education & Research Society (CERS), Ahmedabad – one of the oldest consumer rights forums in the country, particularly in the energy sector.

As compiled by CERS, the plant load factor ( PLF) of the state generating companies has dropped from 75 per cent to 65 per cent in last decade because of low demand.

Also, the recovery of bills is less than 70 per cent in Bihar and Uttar Pradesh.

The average gap between power generation cost and tariff charges by state discoms is nearly 82p per unit, making generation unviable. The state generating companies have to pay nearly ₹ 8,000 crore to Coal India as the amount is not received from discoms. “ The financial crisis of the power sector in India has worsened. SERCs have failed to generate competition in distribution sector as open access is applicable to only industrial consumers having consumption above 1 Mw. Even open access has also totally collapsed because of restriction and limitation of transmission lines,” said Bajaj.

So, while the domestic consumers reel under power cuts, industrial houses are making the most of the cheap power available in the spot market.

“We try and convince the discoms to buy short- term power at cheap rates during such times rather than depend on costly long- term power. Uttar Pradesh and allied northern states have weak transmission, which gets overloaded because of more supply and eastern states dont have sturdy distribution network,” said Mediratta.

The vicious circle then gets complete as the power producers bring down their capacity as there is no demand and hence dont even sell merchant power in the open market.

Meanwhile, consumers keep paying more for power every year as the fuel price keeps going up and also the tariff.

So, the decade- high capacity addition is actually a cause of worry across the supply chain and definitely not an achievement.

Threat to national grid looms with oversupply and no demand even in scorching summers ‘POWER’ PLAY

Sell bids Purchase bids Average MCP* Month ( in million units) ( in million units) ~ per kWh

Mar ‘ 15 3,935.27 3,164.93 2.82 Apr ‘ 15 4,213.26 2,878.04 2.68 May ‘ 15 3,839.92 2,722.55 2.56

*MCP: Market clearing price/ selling price of power Source: IEX

Year Average PLF ( in %)

2009- 10 71.12 2010- 11 66.74 2011- 12 68.82 2012- 13 67.90 2013- 14 66.35 2014- 15 65.10

PLF: Plant load factor Source: CERS

Source: Business Standard; 01 June 2015

URL: http://epaper.business-standard.com/bsepaper/svww_zoomart.php?Artname=20150601a_012101001&ileft=1&itop=45&zoomRatio=130&AN=20150601a_012101001

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